We called the support yesterday to hold in the low to mid 20s and it has despite a little waffling overnight. Traders had trouble processing the jobs numbers for two reasons: On the one hand they are trying to figure out which numbers to key on. On the other, despite the nice improvement to the rate and the consensus being hit on lost non-farms at -125k, the question becomes is the price in fair or way oversold. And even though it is an improvement, does it still suck too much? I’m leaning toward the oversold angle for another reason and that is I think the 9.5% number is good enough to scare short position traders into covering before going into a long weekend. Once again, the volume and delta distributions show that institutions are leading the charge of knee-jerking and following news so they don’t miss the turns on heavy relative volume. Until that cycle breaks we will see more of the same which is sort of being somewhere in between trending and rotational conditions. Very tough to trade because even though the market will rotate at key levels it charges into them like it is trending which means you can’t use tight stops. It is wise to sit out all but the most obvious spots in my view. Yesterday’s break even trade for us was a great example. We were right, but just wrong enough to lose traction. Just make sure you have all the components present on the trades and you see good pooling of volume. Otherwise it isn’t worth the gamble as the edges are a bit depleted now. If the EUR continues to rally it should help lift the Spoos along with potential short covering. The carry trade is ripping as well. All in all I think the supports in the 20s have a good chance of surviving the day and if I were a position trader in the S&P I wouldn’t want to be short right now. Of course that doesn’t mean we won’t work the entire range today from 6 all the way to the 40s…
Today is a pre-holiday trading day and many traders will not be working or will be leaving early. This could add to volatility due to the reduced liquidity. Monday is a federal US holiday and Globex will be closed. DTG will not be posting a pre-market commentary on Monday, July 5.
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