With the exception of that downward action on Tuesday, we've had another drift week here with not much new to go on technically. From what I've seen, a lot of traders are just playing it small or watching. We had rotation into sectors that would benefit from economic recovery and infrastructure as we wait for today's monthly employment report. The SPX is holding steady partly because the DJIA is still on fire. The technology sector, which is still prone to the action of Treasury yields, is feeling a bit flat and NDX is sitting on the trendline based at March and just over the 50 day moving average.RUT small caps are still acting as if they have nowhere to go.
Wide View: The short-term SPX range into the May expirations on 21 May is hedged in a wide 150-point bracket between 4100 and 4250. If (in the short term) we were to lose 4100 on heavily negative internals, short term traders would go into protection mode -- and that would be reflected in a sharp VIX move. In the event of any such weakness, ES traders will take stock of the previously outlined points of control down to 4000 level that lies just below the SPX 50 day moving average.
Immediate term: tomorrow's NFP report at 08:30 EDT or 22:30 AET may catalyze either a test of 4200 resistance or of 4150 initial support. That 4150-4200 is sort of a hedge within a hedge for tomorrow. The weekly point of contention looks to be around SPX 4175. Anything over 4200 puts ES 4211 and SPX 4218.78 into play. Traders will watch the US Treasury market and USD on that pre-market report.
ES futures: Thursday's cash session was comprised of two-sided trade (typically "local" trade by short term participants) until near the finish when we had a single print run to SPX 4201.62 and ES 4196.50. The way traders handle this is to see how we open in the next cash session. The base of that single print surge is at 4179.75 and the daily volume point of control is at 4171. This is thought of as the fairest price to do business, but this poc is not very prominent, which makes it a bit harder to read. For intraday trading, the important area is 4179.75. If we hold that area, the bulls will stay confident. In auction market theory, this means the "auction" is not over on the upside. If we fall below, it will put intraday traders on guard.
Anecdotal stuff: Aside from those technical areas and from what I can tell, many short-term traders and even day traders are unsure of what this week's behavior portends. I see less conviction that usual and assume you do too. They are waiting for more information. But we have had some very wild Fridays lately so be ready for anything.
