Houston, We Have No Problem... Or Volume
By Nic Lenoir of ICAP
We had called for 1,040 to hold in S&P futures and with the spike in volume into Tuesday's close for month end and in an uptick had rightfully assessed it was the start of the pull-back we expected technically towards 1,085/1,100. Here we are already... This market wastes no time. Two things are odd: After a 30 point move yesterday we did not even get a 5 tick retracement today, ahead of a job report tomorrow which cannot be that great if one is to believe ADP. Also today's price action is to put in light of how well supported it was: there are still a few minutes left but so far lower volume than Monday which was the slowest day of the year. Basically no participation in today's follow up.
While we warned last Wednesday of a possible correction in 10s as we reached resistance and had an interesting intraday reversal, it appears we are on an important support here. We need to see acceleration lower otherwise in the very near term the risk is for another squeeze higher especially if the number is weak tomorrow.
Overnight it would make sense to see markets partly retrace today's price action going into the number. Even if we are to test the upper-end of the 1,085/1,100 range, or challenge the 200-dma at 1,112, we should in theory at least pull back down to 1,072/1,075 before that.
Big picture there remains nothing to be ubpbeat about: there is no decoupling and Chinese numbers are bogus, the only thing holding US equity markets is the certainty that the government will not let them fall, we are still running deficits and accumulating debt we someday will have to default on. Cheers!
Good luck trading,