Hi again traders. Yes, totally understand what you mean about feeling out of sync with things if you are not watching all day, @peejayhercules. Much less context and feel. Hi @samcharlotte77, you know what some famous trader said about having made his money by selling too early and it is all about your time horizons and style. I am usually talking about the weekly or monthly situation, in the hope that it will be vetted against what the reader sees for their personal time frame. It is not easy to glom that with the Australian session as you must watch the currencies and what is going on in your economic data calendar and regional sentiment. Right now we have an SPX that is grinding along helped by an NDX tech oriented rebound at just above the 100% retrace of last month's lows, a DJIA that is high on promises of infrastructure spending and rotation from tech...and a RUT small caps arena that doesn't know what to do with itself.
At present, the US intraday moves are being influenced in large part by short term participants, and I would not expect aggressive institutional accumulation to show up this far above the 50-day average in the SPX without a catalyst. The ongoing sector rotation that has us grinding higher has traders watching the increasing margin for back-and-fill and particularly those points of control in the underlying structure that runs from the beginning of April at around 3970 to where we are now. Even below two prominent ones at 4001 and 3971.25 (both of which are just to the right of some more reinforced structure in March) there are unvisited points of control at 3945.50 and 3921.75. That pretty much covers the immediate structure in question. Hey @Eaglebird, it is great to see you posting here. Enjoyed reading your comments.
Any attempts to push the index near 4250 would make that weak structure (no back and fill) more precarious. We can, of course, correct largely through time instead of price, but at this current level of extension I would be on guard for fast liquidation above the 4100 area. If that does happen, traders keep an eye on how that happens. Does it take place on heavily negative market breadth with sustainable volume and/or a particular focal point of worry? Does it look like methodical, sustained profit-taking (heavy) or is it emotionally charged single print action -- i.e., fast and furious with no apparent cause followed quickly by pushback? The difference is often palpable as it happens, and the tempo will give traders clues about who is doing what. The problem is that when we get too extended people act first and ask questions later. The other issue is that if you’re not watching it as it happens it is hard to know what happened.
Long-time short-term traders seem to avoid frontrunning such moves with heavy cash outlay. Holders of long-term positions with longer term outlooks are going to do things in a different way. The hedging situation is going to be fresh off the monthly expirations and will start to shape itself this week as traders concentrate on the earnings picture ahead. Freshly untied from previous hedging, traders will be keeping an eye on implied volatility measures as we get into the new week. As summer approaches, we will probably see lighter participation and that can sometimes mean sharper moves. It is a bit early to be thinking of summer here, but lately markets seem to be imitating that kind of automated, mechanical style. If you have benefitted from that grind higher, you couldn't be blamed for playing it safe or at least by ear. Will try to update the hedging if we see any volatility this week.
