Good afternoon members! So far in this session we are not seeing anything real exciting taking place in the equity space, but we do have some action going on in commodity futures today. In the equity indices we are seeing relative weakness in the Nasdaq 100 futures due to the large pullback in AAPL today. The pullback is directly related to the weekend sales numbers of the new Iphone 5 as well as riot issues taking place at FoxConn in China which is the plant where Iphones are produced.
So far the S&P 500 E-Mini futures are showing relative strength but at the moment they are also trading to the downside as the September options expiration hangover continues to linger over the marketplace in general. The Russell 2000 Index futures are also showing downside in line with the S&P 500 futures. The S&P 500 appears to be closing in on some short-term support while carving out what appears to be a bull flag on the daily chart as shown below.
S&P 500 Index (SPX) Daily Chart
If the upper range of the bull flag is taken out I would anticipate an extension higher towards the recent highs. However, we cannot totally rule out selling pressure that could push down toward the 20 period moving average. For now, my bias is to the upside in equities but as always I am not willing to get too carried away with that viewpoint.
The Volatility Index (VIX) is pushing higher today by roughly 2.90% as I write this. Price is starting to move higher after testing down near the lows for the past few weeks. It appears that the VIX could be carving out a major double bottom on the daily chart, but it is way too early to declare a large move in the VIX. However, at the very least the current price action in the VIX will keep the bulls concerned at this time.
We have been monitoring the action in the Dow Jones Transports (IYT) closely as they have been under extreme selling pressure as FedEx and Norfolk Southern have announced poor earnings and horrific guidance which drug the entire transportation index lower. Today we are getting a nice bounce right at support which is a positive sign for the bulls. The daily chart of IYT is shown below.
Dow Jones Transportation Index Daily Chart (IYT)
If we get some consolidation in IYT that resolves to the upside we could see a very strong move out of this support area. If the support level breaks to the downside, we could see a major move lower from here.
The Dollar Index futures are moving higher today which is helping to put some pressure on risk assets. Overall I still do not believe the Dollar is going to move above the longer-term descending trendline. I suspect that area will hold and as we speak the Dollar appears to be carving out a bear flag which solidifies the potential of the bull flag we are seeing in the S&P 500 Index.
Dollar Index Futures Daily Chart
If the Dollar rolls over later this week or next week I would anticipate seeing gold and silver moving higher into the October expiration. For now the Dollar remains short-term bullish, but my expectation is that the price action will eventually resolve to the downside.
Gold and silver future sold off this morning but buyers stepped in and both underlyings are well off of session lows. The fact is there is strong buying pressure under the precious metals here. I think we could continue to see some consolidation and even lower prices, but ultimately I don’t think the marketplace is going to give us any great entries. I really like our GLD Call Diagonal as our opportunity to adjust it with a long bias is what really makes it look attractive at this time.
Oil futures are really getting hit hard today as I expected late last week. The selling pressure in oil is closing in on recent lows and should prices break below the recent support zone a move down towards the $87.50 / barrel price level is likely. I am going to watching oil prices closely in coming days as I continue to stalk a possible long entry in the days / weeks ahead.
The 10 & 30 year treasury futures are showing major strength today. Treasuries are an underlying that I am tracking closely looking for an entry point to get short treasuries. I do not anticipate seeing Treasury’s move much above their 50 period moving averages which in both cases have turned down. The 30 year treasury futures daily chart is shown below.
30 Year Treasury Futures Daily Chart
I will continue to monitor the price action, but for now we appear to be in a bullish cycle. When this cycle ends, I anticipate strong selling pressure coming into treasury’s. For now, I am not going to fight the higher prices, but once we get up into the moving averages I will get involved from the short side more than likely.
Today appears likely to be pretty quiet overall, but I am interested to see if we get any action going into the final hour of trade.
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J.W. Jones -
This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the TradersVideoPlaybook.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.