US Mid-Session Update
Using small font here because this is a bit US-centric and you may have no interest in it.
Yes, spicy is the go,
@Bugsam. The points in your report are a bit more pressing. The market dodged a major hit there and what's more we can postpone riots and looting for now.
Information Overload
We have a non-trending or balance day so far on Monday. Futures retraced the overnight range to a bottom of around 2790 and that action is typical for the day after a big drop on heavily negative breadth and higher than average volume.
Overnight ES inventory was net short coming into the cash open. The initial pivot traders will watch is 2800/2805, which is the small gap from 12-13 March. The overnight low is 2790.25 which fall within the gap from 11-12 March. The market posture is at best unsure at this juncture. Market breadth (neutral to just above neutral as of this note) and the 10-year note (upside follow-through from Friday) will be good indicators of how things will proceed intraday as the market tries to balance Friday's action.
With little economic data out today to catalyze the action, global and political headlines will underpin the technical picture. Aside from the initial support at 2790, SPX 2775/2780 is a longstanding area of participation -- a volume point of control with overlapping value areas. Upside targets over 2800 now take on a different character (relative to last week) as psychological posture has moved to defense mode even as crucial moving averages are pointing up. 2815 will be an area of interest today. One could argue that the trend is clearly intact but there is a psychological impediment here to contend with as we await domestic inflation and employment data and news on US-China and Brexit negotiations. The
ES profile will show the gaps mentioned above.
Traders are focused on the small cap index RUT, which fell below its 50 day average on Friday and is now trying to get back on top of that level.
Opinion
This might feel more complicated than usual if you're trying to filter multiple inputs from a diverse range of macro and political risks alongside techincals. Market posture may not have changed that much technically but participants show psychological dissonance that is aggravated by constantly competing and self-interested influences. Financial media and investment bank analysis is trying to spin raw data according to their books. Central banks are trying to keep markets stable; they can appear obsequious and verging on becoming like the politicians who are trying to have their cake and eat it too by bouncing the markets with tweets while making political hay. At times like this, intraday inflection points are hard to spot and short term technical posture is prone to rapid changes. Therefore, position sizing becomes crucial.
Fed members (past and present) have been out today with reassuring words about both the economy and about their flexibility. No one could blame you for thinking this was conspicuous. The Fed's Harker (not voting this year) spoke at length and put forth a conflicting mix of points along with the interesting philosophy that recession risk is determined by what the market thinks about curve inversion. If I understand the message correctly, this thinking compliments the notion that money (and value) is ultimately what we say it is. While it's true that sentiment informs everything from demand to inflation and ultimately how central bankers react to those things, some think there might actually be parts to an underlying reality that can lead or lag how people
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