Jul 272010

Interesting order flow action this morning. Yesterday volume was relatively light and while the broad market bough the rally, institutions sold into it on relatively heavier volume. Meanwhile overnight institutions contradict by buying the highs but on very light volume. One could only conclude that the volume speaks louder and larger traders continue to bet on a correction. A negative Case-Schiller and a likely weak confidence number could be what it takes to get a correction after this multi-day rally. Then again, earnings continue to crush. UBS, Deutsche, Dupont and more beat estimates. The most important of which being the financials. I am of the opinion that in the current global debt climate the market simply cannot sustain rallies without the support of financials. Tech won’t do it anymore, no matter what Apple Heads say. Related markets are also currently pulling us to the long side with the Euro up, the carry trade up, Treasuries selling, and Gold holding flat. Crude gets a boost this morning as well knocking on the 9.50 handle as I write. There are lots of clean levels today but a few things to note are first, the 18 handle overhead is still a major rejection area on the comp and locally is the last major line of highs. Second, if we need to be banging on resistance to find a good spot to pause and sell-off, this is as good as any. Second, there isn’t much reason for traders to bet the grind up through the 20s given the amount of previous trading there. I doubt any big players are willing to bet heavy on an immediate test of the 27-30 handles. If the head fake happens which there is a good chance of, the line in the sand is the 20 handle. We shall see…

 Posted by at 9:04 am

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