Thursday, December 14, 2006

S&P Update

Here is an hourly chart of the March S&P e-mini futures. (This contract is trading about 12 points higher than the cash S&P index). I last commented on this market here.

After the aggressive buying evidenced by the wide range up bar for today's opening hour the market has quieted and has been trading sideways in a narrow range.

I think the buying this morning came from longer time frame traders and investors. Their orders were filled by short horizon day traders. Before the day is over these short time frame traders will probably get tired of sitting with break even or losing trades. To flatten out their postions they will have to bid the market higher. So I expect the S&P's to finish the day on their highs, probably quite close to or in the 1443-45 resistance zone.


Aurelien said...

What level do you think that the futures will come back down to once this move is over?

OD said...

How do you know the morning buying is from longer time frame players?

Anonymous said...

I first heard discussions of short and longer time frame buyers and sellers discussed in a book on the chaos theory of crashes years ago. (Alas it was a library book, not one I own.) It makes a lot of sense that wnen long term buyers exit and the risk gets laid upon the shoulders of short term buyers only, "we have a problem".

But I can see your analysis applying to intermediate and shorter term moves as well, even intra-day. Normally a healthy market has enough buyers and sellers in every time frame to provide ample liquidity. But when one group monopolizes the bid or ask, one of the other time frames is going to get shut out with some pain. Or opportunity.