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Futures Trade Desk- Violent S&P 500 YTD Moves Equate To Nothing

Trade Desk Client Note

Global Futures Market Review

Violent YTD Moves Equate To Nothing

Year-To-Date S&P (NYSE:ES) View: 

History reveals that the near-term chances for a rally into year-end on equity indices trade is high. The chances are that an oversold rally will be in response to any news sound-bite that houses even just a glimmer of hope the EU debt may be contained. Whether the market can sustain a rally that moves into 2012 is of little importance as attention turns to the daily balancing of risk, rather than the long-term investment potential.

ES YTD
S&P 500 (ES) YTD Daily Chart 

Focus is squarely on the near-term S&P 500 valuations and whether values can get into the green for 2011. If US 10-year Treasury values break and hold above 131.50 the chances for an equity rally diminish substantially.


Near-Term S&P 500 View:

ES Near-Term
S&P 500 4-Hour Chart              

Trend: Mixed Momentum: Mixed Sentiment: Mixed Daily Trading Range: High 35.90 (3.2%)

Daily Simple Moving Average Lines: Blue (20 SMA) Green (50 SMA) Orange (100 SMA) Red (200 SMA)

Technical Wave: Testing both support and resistance in equal measure in a mid-term sideways chop that is moving around the Jan 2011 opening prices. Overlapping and volatile price action is struggling to find fair value each day, outside of knee-jerk reactions to breaking headline news or regional markets opening and closing. The latest surge higher in response to central bank intervention pushed prices off summer 1997 ES valuations.

Buy Support: Bullish traders will be looking to buy the short reversals to 1215 (the 38% Fibonacci retracement of the move lower from 1295 to 1145), which could then target 1175 and 1205

Sell Resistance: Bearish traders will be looking to sell any moves that fail to break the 1205 area (the 38% Fibonacci retracement of the move higher from 1145 to 1265), which could then target 1225 and possibly 1250 again if financial outlooks improve

Overall: History reveals that the near-term chances for a rally into year-end on equity indices trade are relatively high. Intra-day moves will be in response news sound-bite that reveal the US and EU debt situations may be contained. Whether the market can sustain a rally that holds through 2012 is of little importance as attention turns to the daily balancing of risk, rather than the long-term investment potential. Focus is squarely on the near-term S&P 500 valuations and whether prices can get into the green for 2011. If US 10-year Treasury values break and hold above 131.50 the chances for an equity rally diminish substantially. 

This Week: Accept that news-headline related moves are dominating technical potential, and that the already high average daily trading range is likely to continue moving higher, creating further volatility. In 16 weeks the S&P 500 has made 16 consecutive moves up and down that averaged 10%, on the back of a daily trading range of 3.3%. Danger signals are flashing, with most initial break-outs being quickly returned to their starting point. The fact that S&P500 values are below Dec 1998 levels confirms that Buy-and Sell trumps Buy-and Hold.