Despite the rally Friday and in the overnight session we just haven’t had any volume participation to speak of – not only with institutions but also the broad market as well. Deltas are way to the long side with big traders leading the charge but all the buying has been on the highs and on extremely light volume. The interpretation of this could be that we have a short term house of cards on our hands and a gap fill is very likely. On the other hand, this buying hasn’t been by accident and is clearly on speculation that this week’s economic releases will be strong. This is a VERY important week and the coming expiration being a quad witch only adds fuel to that fire. The bottom line is if we have great economic news this week we should move well into the 1130’s but if not we may see new lows. It is do or die time in US equities I fear. The yen is weak again which of course gives a boost to the carry trade and the Euro is showing strength once again with another range breakout. We are also seeing a bit of a yield boost and offer in the 10s which helps as well. Market structure is a little tricky today particularly on the low side. The whole range between 85 and 89 or so is one giant grey area which will make calling any turn treacherous if not on the extreme low side of the range. Plus any sell-off with momentum to that area makes a re-test of the lows virtually assured. It may be wise to just scalp for ticks carefully in that area and wait for a turn at 81 or so. On the other side if we do see positive sentiment settle in in the cash I doubt the OH holds. We will likely see some rotational activity around the R2s, but be sure to confirm with order flow. Once again, the acceptance area trade above is probably the best bet though it is tougher with those to call the turn. 1101-04 should grind around quite a bit and the high rejection there should provide a nice short at some point today. Without any economic releases this morning it may stay quiet volume-wise. I tend to think we will see some mixed sentiment in the sectors today and as such good rotational activity. But again, watch out for the OL/YC/YH area…
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