Short Term Trading week starting 21 Jan, page-74

US Closing Update

Good afternoon traders, sorry for the late report today, I know you know most if not all of this already and it looks like there is less activity here on the thread this week. Hope you are all dealing with this pullback ok.

US Indices on Tuesday's close: SPX: (-1.42%), NDX: (-2.03%), Dow: (-1.22%) and RUT: (-1.69%)

US Existing Home Sales for December came in much lower than expected -- a number perhaps influenced by rising interest rates and less affordable financing. The indices fell further on news that US officials had refused to do preliminary ground work with Chinese trade officials in preparation for the meetings planned for late January -- on account of differences over the theft of intellectual property.

In a complete reversal of Friday's action, ES Futures eventually found their footing at 2616.50 and closed at 2632 after struggling during the initial balance to stay above the 50% retracement of the major downtrend at around 2643. The overnight session is now in play as traders eye the 2600 area nervously. There are three distribution points in the profile at 2625, the poc at 2635 and 2647 at the initial balance (first hour of trade). 2600 is psychological support and 2585 is a volume point of control on a 30 day time frame. ESH19 Closing Profile.

SPX for its part did test the 61.8% retracement of the downtrend from 3 Dec and the 50 day moving average at 2623 and closed above them and on the rising 5 day at 2632.90. NDX tested the bottom of the rectangle bottom at 6604 that runs from 23 October -- after it fell back through the major trend line that it broke on Friday. The Dow tested the 50% retrace of its downtrend as well as its still declining 50 day moving average but settled above both.

The Aussie/Dollar and Aussie/Yen are stable so far in the new session. DAX managed a close over its rising 5 day moving average. CLH19 light crude settled at 53.07/bbl or (-1.4%) and was down on weak Chinese data but not sure how that comports current demand estimates for this year but it's not uncommon and was a heavy driver of Tuesday's stock market action. GCG19 gold settled at 1283.45/oz or (+0.70%) as traders wait for clues about how the Fed and the USD will react to changes in growth sentiment.

Market Internals
NYSE A-D lines: -1608. NYSE breadth: -5.51:1 and NASD breadth: -4.37:1. NYSE cumulative TICK: Negative from the first tick and trending down until 15:15 ET. TRIN: 1.62 -- selling pressure.
NYSE MOC: -496M at the reveal, which stayed firm into the close and a final imbalance of -597M. Technology and Consumer Services led that selling. Both NYMO and SPX tick turned down, of course.

SPX volume: 2.591B. SPX composite volume: -1.87%. NYSE composite volume: -2.91% and NYSE total volume: -3.69%. Implied Volatility: VIX: 20.80 or +16.85%, VXG19 (now): 19.75 or -2.11% and VXH19 (now): 19.47 or -1.29%.

Debt
Treasuries also experienced a reversal of Friday's action and yields fell across the curve as bills notes and bonds were bought on the back of the IMF forecast and trade news. The 2-year (-4 bps to 2.57%) to 10-year (-5 bps to 2.73%) spread is at 16 bps and the 2-year to 30-year (-4 bps to 3.05%) spread is now 48 bps.

Comment

Existing Home Sales came in very low and added insult to the injuries caused by the repetitive, self-enforcing game of high stakes confirmation bias going on in Switzerland. It is rare for anyone to say something without personal interest. Not sure how many real altruists in the world. Of all participants, the IMF head is viewed by some as sincere and measured; something that can't be said as easily for all of the fund managers. More important than the initial mechanics of today's sell down is the crowd psychology that is swayed easily at crucial SPX technical junctures. Just how much that psychology clashes with existing support remains to be seen as momentum oscillators recede. It will not be seen easily by most of the chatterers in the Alps or anywhere else -- it never was. For short term traders - and at these delicate market levels - closing values will matter more than intraday action and progress on the trade war - as well as the maintenance of sanity in DC - will matter more than global forecasts for 2020. For the moment and after a large run, traders pause and wait for any follow through to today's action.