As we enter August we should see some of the current European problems fade from view as we enter the European vacation season. Generally speaking, the Europeans close shop for the month of August for vacations. Well, maybe not so much this year. We are beginning to feel like a ping pong ball, up and down, back and forth. We did see the markets break, well sort of, to the upside in the Friday session. Was it the typical short covering trend following a rally or something more? We have the generals leading the troops or do we just have the generals leading. Yes, the Russell 2000 boomeranged higher, up 2.83% on the day, in the Friday session but it remains below the downtrend line. For the bulls, they will take the rally no problem.
The notice, which can be found below these comments, is the “death of the floor” and much as we don’t like it this signifies the firing of hundreds of workers who made their livelihood either as floor brokers or support staff. We knew this was coming from the first sweet songs sung by the Inter Continental Exchange (ICE) to the members of the New York Board of Trade (NYBOT). We all knew this day was coming, ah but the money was so grand…..why not take it! Alas we were not among the lucky seat-owners that could sell out to ICE but rather were poor lowly FINEX members of NYBOT. We were slightly more than a small nuisance to the incoming group. At those meeting between the ICE executives and the seat holders and floor-traders of the NYBOT, we were assured that our world would not change and that the jobs and responsibilities of the floor-brokers, locals and support staff would not change. It was reported that only a few hundred people would lose their jobs. Perhaps their study was not complete, but it was far more than a few hundred people who lost their jobs and their livelihood.
We are all for change and applaud the use of electronics. We were among the first on the floor to use electronics for both trading and as electronic trading cards (ways to notate and clear trades with your contra). We always believed that there was enough room for both and we agreed that more and more would migrate to the electronic worlds. We did believe that in the event of electronic failure, that people would come forward to ensure a fluid market. Now, of course, that is going away. The CME believes as we do that people are a better backup system then another computer and they have kept the floors open, although much smaller, and available.
We, as floor brokers and market makers took pride in giving the customer a “good fill” and moving thousands of options without moving the market more than a quarter of a point. We used invent combinations of options and futures that would make your head spin these packages were all priced as a single package. We were able to complete transactions quickly and efficiently. We hedged, we traded, and we laughed a lot. It was probably the best job in the world. Yes, there were days when it was the worst, especially when you had a bad trade on and had to deal with disasters. Say goodbye to the pits…..RIP.
IFUS to Transition to Electronic Dealing via the Floor Facility
After Friday, October 19, 2012
Effective with the close of trading on Friday, October 19, 2012, ICE Futures U.S. will transition to offering its options markets exclusively via the Exchange’s electronic trading system. The Exchange will continue to support access to the electronic platform for Exchange-member brokers and proprietary traders from the floor facility.
The majority of options order executions during 2012 have been traded in the electronic market. The electronic trading platform has been the sole trading venue for all Exchange-listed futures contracts since March 2008.
We anticipate that many current floor brokers and traders will continue to utilize the floor facility for the foreseeable future. Customers who access Exchange contracts using floor broker operations should contact their brokers to determine whether the broker will continue to provide this service to ensure uninterrupted market access.
The Exchange will continue to provide additional information and updates.
On Monday it looked as though the US Dollar Index was breaking out of orbit escaping the August 2010 high’s gravity. Though the index gapped above the 83.632 level, the sort of action we would expect when finally moving above a historically significant point of resistance, we had our reservations. The candle was puny and small, almost a spinning top. If Schwarzenegger were describing this candle formation he might call it a “girly man.” The Tuesday action looked a bit healthier and gave us a bit of confidence but then, whamo! The index pulled back to 83.641 and then on Thursday made a strong move to the downside breaking through this level, and making mincemeat of 83.045. Needless to say some profit taking took place.
The daily chart shows all three indicators that we follow issuing healthy looking sell signals. The top of the Bollinger band is at 84.41 and the lower band is at 81.965 with both bands beginning to curl in. The 20 period simple moving average is at 83.188, the 5 period exponential moving average is at 83.193 and we are currently below both. On the downside we see support between 81.652 and 81.379.
The weekly candle chart shows we have once again played with the 83.682 resistance line, however; we are still in the process of coiling and forming a triangle. All indicators that we follow are here also issuing healthy sell signals. This market could pull back to the trend line and still not be ugly.
The .5% x 3 point and figure chart currently has two activated and unmet targets at 85.96 and 91.72 and one activated counter trend target of 66.65. We have not yet reversed into a down column but it looks as though we are on the verge. The Index is riding the upper Bollinger band and is above the 20 column moving average.
The 60 minute .1 x 3 point and figure chart shows a failed Bearish Pattern reversed which has resulted with a pole (the signal being given at 83.50, the 50% retracement from the high). There are currently two activated and unmet upside targets of 84.3 and 85.3 and no current downside targets.
The Dollar Index is looking a bit scary to us and not because of the sharp move down but rather from the mixed bag of signals it is currently giving off. Looking to the daily chart, the index needs to break above 83.632 again and on decent volume. No, she can’t come near 83.632; she needs to plow through it. If not, this will begin to look like a head and shoulders top. Looking at the weekly chart we see a triangle formation still intact but with the same possible head and shoulders formation lurking in the background. With Monday’s break, the index has raised the bar for what it must do to keep us convinced it will break to the upside. The index made the bed, now it must sleep in it.
The S&P 500 actually enjoyed a robust rally in both the Thursday and the Friday sessions. The Friday, up 2.05% in that session, took the index above the previous highs and opened the door to the highs seen in May. We are above the Ichimoku Clouds for all time-frames. The next area of resistance is at about 1411 and then there is the onerous 1419.75 brick wall. So long as the market stays above 1321.25 we will opt for the short-term bull camp. Although we have signs of exhaustion, the market tends to look at the next higher level and at least tries to match it. That level is 1411. We are far from overbought and could easily move close to that level before becoming overbought. The upward trending channel lines are 1328.82 and 1406.12. The 5-period exponential moving average is at 1358.54. The top of the Bollinger Band is at 1381.86 and the lower edge is seen at 1323.91. Although we are currently above the upper Bollinger Band we seem to have some momentum and likely will stay there for another day or so before retreating back inside the bands. The Market Profile chart shows 1409.46 as a possible area which could lead to a quick rally or retreat. If you look at the Point and Figure 1% by 3 chart, you will notice that we are still below the trend line and have not printed another X in the column. The 60 minute chart which is a one by three chart, naturally posted a long line of X as a result of the three-day rally. The chart also demonstrates that most of the target have been met leaving only the 1399 target and the 1436 targets currently unfilled. This week will define the terms of this rally.
The NASDAQ 100 rally for both the Thursday and the Friday session but did not rally enough to remove the high from July 19 when it printed 2658. The NASDAQ 100 has made three attempts to remove that barrier and so far (the key words) had not been able get through. All the indicators that we follow herein continue to point higher with plenty of room to the upside. The 5-period exponential moving average is at 2594.93. The top of the Bollinger Band is at 2667.29 and the lower edge is seen at 2526.88. Currently this market is inside a rectangle bounded on top by 2658 and on the bottom by 2503.50. We emerged above the Ichimoku Clouds for the daily time-frame and continue above the weekly and monthly clouds. When looking at the 25 by three point and figure chart you clearly see the congestion with target on the upside at 2775 and the downside at 2350. The Market Profile chart shows that we are nearing the edge of the single print area which could lead up to the previous bulge at the 2708 or so level. The single prints on that area of the chart are the same number found in the Point and Figure projection; 2775. When numbers from different tools read the same, those numbers need to be respected.
The definite winner in the Friday session was the Russell 2000 that advanced 2.83% in that session. Although the rally in the Friday session was robust the market remains below the downtrend line. We are above the Ichimoku Clouds for the daily and the weekly time-frames. The downtrend line is at 800.20 and the lower channel line is at 754.93. The uptrend line is at 762.25. The 5-period exponential moving average is at 782.20. The top of the Bollinger Band is at 823.40 and the lower edge is seen at 764.78. All of the indicators that we follow herein are pointing higher with plenty of room to the upside. The Market Profile chart shows us that 818.55 is a single print area and one to be respected. Although the rally in the Friday session was an eye-popping rally, this index needs to close above the downtrend line before the momentum guys will jump onboard.
Crude oil looks as though it is making either an inverted head-and-shoulders bottom or a cup-and-handle. We are incised the Ichimoku Clouds for the daily and monthly time-frames and are below the clouds for the weekly time-frame. The uptrend line is at 88.83 and the downtrend line is seen at 90.64. The 5-period exponential moving average is at 89.52. The top of the Bollinger Band is at 92.37 and the lower edge is seen at 83.03. The Market Profile chart tells us that above 92.72, we will either melt to the upside or retreat. The Point and Figure chart shows that there is a downside target of 81 and an upside target of 109. Looks like we are coiling which tells us that we will likely break out of this trading range in the not too distance future. Sadly, the chart does not tell us which direction the market will move to. All the indicators that we follow herein are pointing to the upside. Watch the US Dollar for clues as to the future direction.
Gold broke above the Ichimoku Clouds in the Thursday session and continued the rally removing the July highs. We remain below the clouds for the weekly time-frame and above the clouds for the monthly time-frame. We remain in the box or the rectangle and although the market has been very positive, it isn’t out of the trading range yet. The 5-period exponential moving average is at 1605.38. The top of the Bollinger Band is at 1623.38 and the lower edge is seen at 1557. All the indicators in the three time-frames reviewed herein are pointing higher. We would not fight the trend of this market. For now, it is bullish with a retreat expected as the market digests its recent moves. The Market Profile chart shows that we are becoming narrower in the range of the daily trades. This means that we are coiling and will likely break out of the coil soon. The current Point and Figure two by three chart indicates that 1680 is in the card. We continue to like Gold, but then like a ferret, we are attracted to shiny gold stuff.