The index markets suffered through a massive liquidation in the final 90 minutes of trading. At 1:30cst yesterday the SPH contract was trading at a recent high of 1432.50, that bid was quickly erased as heavy selling hit the market below 1425 and 1415…eventually leading to the ultimate puke that pushed the contract as low as 1393 after the cash close. Clearly the market is in a state of turmoil and during these times prices get out of line due to “need” based selling. The question, of course, is whether or not we are at that juncture…lets take a look at the past down moves in 2007:
As one can discern, the market has been awfully difficult for those that are purely long over this period. However, given the extremes in price movement one should be prepared for buying opportunities, even in the shortest of durations (from a time frame perspective). We have entered a spot that markets do not see that often and one thing that I have learned throughout these moves is that the market tends to go further than one thinks possible. In other words, yesterday may not have been the washout.
From the intraday perspective…the obvious target for the SP is the cash closing low from the spring of ’06 (1377.95). That level is certainly not to be construed as a line in the sand. Rather, just a benchmark about where the current market is trading. Keep a close eye on bounces, particularly in the morning that lose steam in the afternoon. Resistance lies between 1407.50 and 1414 in the SPH. Any settlement above 1423 is a positive and should lead to a position long.