May 062010

We are certainly at another key level and although volume is more mixed overnight there is a still a line in the sand under 65 with sustained selling to the south. I would like to think after all this craziness we are in for a range day but as I said the heavy volume overnight is concerning. You tend to see that with big positioning and reloaded positions. However, economic news (which of course isn’t yet priced in given the sell-off) continues to be positive with claims decreasing, productivity increasing, and labor costs decreasing. Again, I have to call YL the interim support but with a BIG question mark. We will just have to be reactive once again. If it down break down, 52 is the last bit of hope for longs but I don’t think it is strong enough to hold it and we flush down to test the 46/47 handles. I do feel strongly that it holds as it is a key level on the composite profiles as well. If it doesn’t my guess is we move to the low to mid 30’s very quickly. The VIX continued to come off into the close yesterday and we did have some program buying late in the day as well so we shall see if there is any pull to the long side from that, but again it is hard to say. As I write this we just broke the OL – kind of a repeat from yesterday which is why you will note I only had it as a scalp as I feel 54.75 is the key off the open – not the OL. We do have strong pivot support there as well so I’m thinking it may hold at least for a rotation so we will look to fade if order flow confirms. We will also at least scalp 53/52 and definitely look to fade 46/47 for a solid rotation. I would feel very good about that if we flush down. On the other side we have to be careful at the OH/YH as again there are too many potential rejection prices up there. The OH is likely not very strong so we will probably only scalp it and wait for a better op somewhere between 73 and 75. If we do get above 75 expect a fast rip up into the 79-81 range and then another HUGE wall of resistance to fade around 82/83/84/85. Interesting structure…

 Posted by at 9:11 am

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