Monday, June 20, 2011

Pre-market thoughts for Monday 20th June 2011

As I write this (2am E.T.) U.S. index futures are already showing large gaps down below Friday's lows (on ES). This is a situation that usually does not favour gap fill and certainly the data I have seems to support this.
With no clear resolution on the Greece situation all eyes will be on the unfolding situation in the Greek parliament where we have a debate and no confidence vote later in the week. The EU has put off any further discussion of payment for loans until early July. This leaves the market in a tough spot as it hates uncertainty thus it will likely be a very news driven and volatile market until such time things are sorted out.

More support for some bearish action today is the fact that there has been a tendency for mean reversion post OpEx. Thus given the slightly positive action on Thursday and Friday then we would expect weakness today. Therefore my bias today is to look to sell any rallies. 1260 shapes as an important level on the ES and if we can hold and break above the short term down trend line, then I would likely go long. Weakness below 1260 and I will think we will retest last weeks lows. At this stage it seems quite clear that we are going to retest the 200 day moving average again (on the SPX cash). Best bet is that we undercut the 200 day and perhaps close below it, going for the March lows of 1243 on the ES (this would also shake out a lot of the weak hands and reset us for perhaps the next leg up). Remember we have still to tag the weekly trend line on the ES yet. Interestingly most gurus and sentiment quants are advising that this is a good area to start building longer term bullish positions (1-3 months) with the caveat on watching how weak the price action gets (bail if it looks like cascading down lower). Myself personally I would probably want to see some follow through before establishing significant longs though but then again I'm an intraday trader so I don't really take longer term positions (I may put on some speculative bullish spreads using options though).

No comments:

Post a Comment