Some may think the long side settling in is sort of automatic but the big picture isn’t all that clear. As expected the market shrugged off GDP which was unremarkable in that moderate growth is signaled without any signs of inflation. Consumer news is much more important than fiscal stuff of late, so we will see if the sentiment number at 9:55 puts in a swing. On the volume front all is not so obvious either. Yesterday’s rally was actually on quite mixed overall volume with institutions more pessimistic than the broad market. Overnight though is another story with size favoring the long side and the broad market slightly negative. There is a line in the sand just above yesterday’s high and above there most trading has been to the long side. No evidence of strong fading of the OH yet which points to a likely failure off the open if we get a good strong swing. No gap today should help that. If we do break up we feel the 10 handle may provide some significant resistance especially ahead of the news so there should be good fading ops there at least for some scalps. Above there it gets tricky as the daily R1s may hold it down a bit as well given we are likely to have a typical lighter volume Friday. We might consider breaking long above 12 toward balance at the 13 & 14 handles IF order flow looks really strong. Otherwise we will wait for the higher probability fade of the interim highs. A word of caution: The top side may reject anywhere between 15.50 and 16.50 and volatility will be high up there so picking a spot won’t be easy. Be wary of being greedy and trying to sell the absolute top as if it ticks even a little above it will likely rip up fast. That has been the pattern of these interim highs in this rally. On the short side we like scalping 3.25/75 long on the vol and fading the OL as well which we think will hold as long as the news isn’t negative. If we do break down we may sell into 98/97ish, but it may be tough to pick a spot with the 24 hour and day session pivots in the way. We feel 95.75 is interim support and there is little doubt we would fade a move to there. PS: The VIX has come down and leveled off quite nicely and there was another burst of program trading into the close yesterday. These items obviously both help ou slight handicap to the long side and why we feel the OL will hold at least for a goo fade opportunity.
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