Monday, November 01, 2010

Emini Futures Trading / The End Is Near

from the trading desk of CFRN...

The market awaits the Election results tomorrow evening and the FOMC on Wednesday! The S&P Emini got a boost from today’s economic data. Personal Income fell .1 %. Construction spending rose .5 %, while ISM Manufacturing increased to 56.9 from the previous 54.4 in September matching or beating expectations. The rally quickly evaporated at last weeks CFRN weekly trading zone(WTZ) or the 1192/1193 area.

With this mornings sell-off, technically we are now looking at a potential double-top at the 1193.00 level. In addition, the momentum indicators are showing signs of "bearish divergence". Certainly, there is a great uncertainty in the market as we await the main events. The economic and earnings outlook have been bright spots but valuation is still in question after the mammoth run in September and follow through in October.

The market today covered our CFRN Weekly Trade Zones(WTZ)  of $1188.00 - $1189.00 down to the $1174 - $1175.00 level. The US Dollar is the talk of many analysts in terms of QE2 and what it means to the market in terms of a cup half full or half empty depending on the view of the trader. The market does not like uncertainty and may need time to digest the next couple of days. Traders may take smaller positions to garnish smaller profits while waiting for a trend to develop post events. Recovery is still gradually showing in most of our economic reports. Slow as it may be, the end result may be further out than our sights would like to see. China has been a focus for our recovery model somehow with strong manufacturing data. Recently, we have looked to China’s growth for our direction. Crude oil had quite a bounce today on expectations of a weaker US Dollar. The US Dollar is typically inverse to many of the markets such as the Stock Indices, Metals and Energies.

S&P 500 Emini Futures / ES

Tuesday, we look forward to the CFRN Weekly Trade Zones as a roadmap. We expect a Narrow Range day tomorrow or the $1188 - $1189.00 level to act as resistance if we stay trapped under the double top and we envision $1174.00 - $1175.00 area will act as support . Pre-event trading may be erratic. We do not expect the market to break-through resistance at $1193.00, but technically the market is still in a bullish stance. It may not want to break-down quite yet with so much strength. Long term, if the market penetrates the 1164.00 area in the S&P Emini then the market might be confirming a top which could lead us to the 1118.00 area.

Vision without action is a daydream; action without vision is a nightmare. - Japanese proverb

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