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With an explosive rally well underway ahead of the Monday US opening, it is possible that a number of shorts are destined to be forced out of position. Clearly the markets were excessively bearish around last week’s lows and for good reason, because it appeared that the EU was poised to throw off an underwhelming aid package for Greece in the face of what appeared to be full blow EU debt contagion. Clearly many in the markets didn’t expect to see such a robust EU stabilization plan and certainly the markets didn’t expect to see a coordinated currency swap operation to give the plan some added teeth. Some in the market are pointing to the better than expected US Non Farm payroll report from last Friday as a sign that equities had become moderately undervalued. While we doubt the sustainability of the broad based positive euphoria in place early this morning, it might be folly to doubt the optimism today.
S&P 500: The S&P is streaking back toward levels seen at the beginning of May. As mentioned in other sections this morning, the real panic seemed to gain momentum around May 3rd and 4th and therefore we have to think that the S&P is capable of a quick return to that level in the coming trading sessions. The low on May 4th was 1164 but a real downside breakout on the EU situation took place up at 1177.80 in the June S&P. With the combined spec and fund positioning in the S&P as of May 4th showing a net long position of only 330 contracts and then seeing an added decline of 112 points, we have to think that the S&P could have seen the biggest net short positioning since the middle of 2008! Therefore, one should not under estimate the amount of short covering that could be seen in the coming trading sessions. Initial resistance is pegged at 1164, with secondary resistance seen at the 1175 level.
DOW: In looking back on the Mini Dow action over the last two weeks, one gets the sense that the real panic off the Euro zone situation started on May 4th and that might allow the market to rebound back toward the 10,892 level, with really significant resistance on the charts seen back up at 10,916. The Commitments of Traders Futures and Options report as of May 4th for Dow Jones Index $5 showed Non-Commercial traders were net long 12,511 contracts, a decrease of 5,727 contracts. The Commercial traders were net short 11,867 contracts, a decrease of 5,591 contracts. The Non-reportable traders were net short 644 contracts, a decrease of 135 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 11,867 contracts. However, from the COT report mark off to the low last week, the June Mini Dow managed a further decline of 1,052 points and therefore the spec long positioning was probably pulled down significantly. We see an initial upside targeting of 10,771 today, and perhaps a rise to even higher resistance of 10,818 on Tuesday morning.
NASDAQ: The June Nasdaq has forged a rather impressive recovery wave this morning, with the market potentially poised to regain the 1950 level in the coming two trading sessions. In fact, we see the 1950 level as some form of bull/bear line and we expect the market to spend a lot of time this week above that level. The Commitments of Traders Futures and Options report as of May 4th for Nasdaq Mini showed Non-Commercial traders were net long 14,444 contracts, a decrease of 6,748 contracts. The Commercial traders were net short 43,514 contracts, an increase of 383 contracts. The Non-reportable traders were net long 29,070 contracts, an increase of 7,131 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 43,514 contracts. With the Nasdaq from the COT mark off to the low last week seeing a decline in excess of 200 points, the markets were certainly factoring in a major global financial meltdown. While the EU plan might not be the full solution, the coordinated effort is big enough that most flight to quality sellers are probably going to forced back to the sidelines.
TODAY’S MARKET IDEAS: At least a temporary all clear on the debt front, with a severely oversold market in need of a couple days of short covering.
Stock Market Commentary – 2010.05.10
by Dave Hightower on May 10, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
With an explosive rally well underway ahead of the Monday US opening, it is possible that a number of shorts are destined to be forced out of position. Clearly the markets were excessively bearish around last week’s lows and for good reason, because it appeared that the EU was poised to throw off an underwhelming aid package for Greece in the face of what appeared to be full blow EU debt contagion. Clearly many in the markets didn’t expect to see such a robust EU stabilization plan and certainly the markets didn’t expect to see a coordinated currency swap operation to give the plan some added teeth. Some in the market are pointing to the better than expected US Non Farm payroll report from last Friday as a sign that equities had become moderately undervalued. While we doubt the sustainability of the broad based positive euphoria in place early this morning, it might be folly to doubt the optimism today.
S&P 500: The S&P is streaking back toward levels seen at the beginning of May. As mentioned in other sections this morning, the real panic seemed to gain momentum around May 3rd and 4th and therefore we have to think that the S&P is capable of a quick return to that level in the coming trading sessions. The low on May 4th was 1164 but a real downside breakout on the EU situation took place up at 1177.80 in the June S&P. With the combined spec and fund positioning in the S&P as of May 4th showing a net long position of only 330 contracts and then seeing an added decline of 112 points, we have to think that the S&P could have seen the biggest net short positioning since the middle of 2008! Therefore, one should not under estimate the amount of short covering that could be seen in the coming trading sessions. Initial resistance is pegged at 1164, with secondary resistance seen at the 1175 level.
DOW: In looking back on the Mini Dow action over the last two weeks, one gets the sense that the real panic off the Euro zone situation started on May 4th and that might allow the market to rebound back toward the 10,892 level, with really significant resistance on the charts seen back up at 10,916. The Commitments of Traders Futures and Options report as of May 4th for Dow Jones Index $5 showed Non-Commercial traders were net long 12,511 contracts, a decrease of 5,727 contracts. The Commercial traders were net short 11,867 contracts, a decrease of 5,591 contracts. The Non-reportable traders were net short 644 contracts, a decrease of 135 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 11,867 contracts. However, from the COT report mark off to the low last week, the June Mini Dow managed a further decline of 1,052 points and therefore the spec long positioning was probably pulled down significantly. We see an initial upside targeting of 10,771 today, and perhaps a rise to even higher resistance of 10,818 on Tuesday morning.
NASDAQ: The June Nasdaq has forged a rather impressive recovery wave this morning, with the market potentially poised to regain the 1950 level in the coming two trading sessions. In fact, we see the 1950 level as some form of bull/bear line and we expect the market to spend a lot of time this week above that level. The Commitments of Traders Futures and Options report as of May 4th for Nasdaq Mini showed Non-Commercial traders were net long 14,444 contracts, a decrease of 6,748 contracts. The Commercial traders were net short 43,514 contracts, an increase of 383 contracts. The Non-reportable traders were net long 29,070 contracts, an increase of 7,131 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 43,514 contracts. With the Nasdaq from the COT mark off to the low last week seeing a decline in excess of 200 points, the markets were certainly factoring in a major global financial meltdown. While the EU plan might not be the full solution, the coordinated effort is big enough that most flight to quality sellers are probably going to forced back to the sidelines.
TODAY’S MARKET IDEAS: At least a temporary all clear on the debt front, with a severely oversold market in need of a couple days of short covering.
Tags: DOW, Financials, NASDAQ, S&P 500, Stocks
About Dave Hightower