Trade Desk Client Note
Global Futures Review
Buying The Dip? Hold That Thought
Still 17% off yearly highs and 8% off YTD, equity markets are holding S&P 500 valuations above 1120 support, as economic sentiment drops.
The S&P 500 move from 1370 to 1075 has created an ABC-Down structure that technically targets 970 support if equity selling intensifies.
A break below 1130 targets 1105, 1095 and 1075 areas. A subsequent break below 1050 draws in 970, and a Fed induced QE3 announcement.
Looking to buy the equity dip? XLF the financial sector ETF says No. Unless XLF closes a Weekly chart above 13.50 equity indices will struggle.
There are no positive outlooks or economic forecast that justify ignoring the reality that is unfolding in inter-bank CDS valuations.
The Spreads widening on investment grade debt insurance does not bode well for those looking to get long stocks, as noted August 1st.
The overnight push to test equity support may have created a buy-the-dip set-up on precious metals that could develop as the session builds.
Trade Signals will be issued as momentum builds and the picture becomes clear as to what side of the Futures market the speculators find appealing today.
Traders are at a near-term stage in the market cycle that many find one of the most frustrating to deal with, and where the most money can be squandered in trying to establish where fair value is actually placed. This is when the global market goes through a near-term phase of consolidation and into a sideways period of trade that absorbs the recent moves.
Traders begin anticipating a continuation of the previous trend, and many will act ahead of signals forming, in an effort to beat the rush. Most would be well advised to move away from the mouse and to breathe deeply as this period of trade unfolds.
The consolidation phase could easily turn into a rout on equity markets, but as yet the High Frequency Algorithms have not given up on testing the long side of the market. Stay patient, and wait for signals to confirm. Now more than ever before is the time that a sound alternative support program should be implemented by all investors.