Short Term Trading Week Starting: 17 Dec, page-30

Good morning,

 

US Indices on Monday's close: SPX: (-2.08%), NDX: (-2.22%), Dow: (-2.11%) and RUT: (-2.32%) 

 

ESH19SPX positioning is short going into the close after covering a wide range with a high of 2605.75 and a low of 2533.50. ES closed at 2555.50. Futures profile updateshere.

 

NYSE A/D Lines: -2229.00.  NYSE breadth: -6.67:1 and NASD breadth: -6.26:1.  TICK: negative all day and weak into the close.  NYSE MOC: -342M.

 

By now, you probably know that selling increased after these comments from a hedge fund guy who likes bonds and reckons we go below the YTD lows. Well, we are not too far from below (SPX 2532.69) as the SPX went just below it and bounced from 2530.54 before bouncing to close at 2545.94.

 

From here things look dim, and traders are not the only ones noticing. Friday's tweets from the President and jive talk about the Federal Reserve from one of his trade war architects (a trade hawk) on Fox news Friday show they seem concerned with the market, but perhaps they don't understand what they have gotten themselves into as far as the SPX goes. We often hear that the stock market is not the economy but SPX is historically very tied to consumer confidence and spending habits and if it fails in a big way then so does  an administration's political cache and credibility. This would apply even if the damage to the bull market and/or the economy is mostly because of the end of easy monetary policy and the natural cycle. People who don't follow the markets or care about SPX levels will figure things out in their own way and in due time. They will not equate this administration with economic success. If things continue down, history will record the US/China issues as a primary trigger for the bear market. The administration would seek to show that China has responded positively to US pressure; they envision a scenario where they reap the benefits of a solution to trade imbalances and a stock market that rewards them for this victory.  Even if that is possible, it’s a long term kind of thing. Today is what happens when you wage a trade war while the Fed is busy unloading a huge balance sheet and raising rates.

 

·        Traders now wait for the FOMC rate decision and press conference this Wednesday starting at 14:00 ET or 03:00 AWST/ 06:00 AET on your Thursday …derivatives interest will probably lean heavily toward positions that profit from an exaggerated move in either direction.  Shorts could get the scare of their lives. 

·        There may be a partial US government shut down atweek's end.  The meaning for the stock market is debatable but the market often reacts to things that mean next to nothing when market participants have heightened sensitivity to negative news. 

·        NYSE MOC was over -2.5Bto sell - huge! -going into Monday's close but flipped to -342M on the close.