A Few 30 Minutes Charts Worth Noting

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Brad Sullivan

These charts were posted on Thursday March 6, 2008 at 1215 CST in our SuperPlatinum Virtual Trading Room.

Equity Index Update (Special Edition)

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Brad Sullivan

Editor's Note: Brad Sullivan's Morning Commentary is usually posted in our SuperPlatinum Virtual Trading Room around 0845 CST.


The index markets are called to open higher as the market attempts to follow through on yesterday’s strong reversal. The SPH is trading at 1366, + 7.00 on the session. The real strength this morning lies in the NQH futures which are trading higher by +1% at 1807. Strength in the technology sector is being led by RIMM (Research In Motion) which updated guidance this morning and is trading higher by +12pts to 109.50. In addition, CSCO (Cisco) was upgraded in a research note and is higher by +2% in the premarket.

Today’s session should hinge on whether or not buyers step up at higher levels. Yesterday’s action was quite constructive for the buyside as sellers could not generate any selling below key support zones. Will the buyers step up today? Certainly the table is set.

I have enclosed 3 charts showing that show some interesting situations in the near term.

Equity Index Update

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Brad Sullivan

The index markets continued their winning ways with another close at or near the high marks for this 50 month bull move. Further firming things was a sharp rally into the futures close of trading that led to the SPM contract settling nearly +3.50 to fair value. This morning, the indices are holding around their respective unchanged levels. There is little activity in Europe as Great Britain is on holiday.

Clearly the focus of this week will be on the FOMC meeting adjournment which takes place Wednesday afternoon. Throughout this push higher in the marketplace, the tendency has been to rally into and through the meeting. Thus far, there seems little reason to fade the conventional trading wisdom. However, I will point out one differential and that is that this meeting will mark the first time the FOMC will meet with the market trading at all-time highs. Reversal potential is worth keeping in the back of one’s mind for Wednesday afternoon and Thursday.

On Friday, I focused on the first resistance zone between 1515 and 1518.50 in the SPM contract. The trade pushed into that zone early, but did very little trading in that zone. Today’s action, particularly in light of the bullish close on Friday, should lead to greater probing and duration in this area. Once again, I will find it difficult to chase the long side up here and would rather wait for a clean move above the 1520 level before playing the long side in the late portions of the session.

Support areas today in the SPM contract will be from 1513 to 1512; 1510.20 to 1509.50. If we get below this zone, look for a push lower – most likely in a sell stop driven mode during a light volume time of day (late morning/lunchtime) towards the key support zone of 1507 to 1504. Only a settlement on an hourly basis below this zone would put the recent upside swing in short term jeopardy.





One index to key on today is the ER2 contract, which had a large burst of buying into the futures bell on Friday afternoon. The contract has traded in a 0.8% RANGE since our rally ended on Wednesday morning. In addition, this contract has a strong history of “follow” from strong/weak closings. Looking to be a buyer around the opening few minutes of trading for a push towards 840 seems plausible.

Equity Index Update

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Brad Sullivan

And the Midcap 400 shall lead them. Was it not just 6 weeks ago that the market suffered from an intense bout of “forced” liquidation? Now, here we are looking at new all-time closing highs in the Midcap 400 Cash index and watching the remainder of the indices get within shouting distance of their 2007 highs. The NDX was helped by comments from the CFO of CSCO when he stated that earnings would be towards the high end of estimates during Friday afternoon. The stock immediately shot from 26 to 27 and provided the lift needed to boost the index market on a quiet Friday afternoon.

This morning the indices are called higher based on several factors. First we had strong rallies in the Asian markets and that has carried into European trading. In addition, Sallie Mae agreed to a private buyout that put a nearly 50% premium on the stock. Finally, earnings from two key banks C and WB were much better than anticipated.

Of course, we cannot forget our old friend the currency market which was given the all clear signal from the G7 over the weekend to continue the “carry” trade with abandon. Indeed, overnight the Euro/Yen continued through its respective all time high and the USD/Yen appears not too far behind. This liquidity driven currency trade has produced one of the key elements for tracing index moves both domestically and abroad. Simply put, comments out of the G7 meeting show just how sensitive the central banks of each nation are when it comes to the carry trade. Given the tremendous growth of funds using this trade over the past several years, it is easy to imagine how ugly a liquidation of this trade would end up being for the global markets. Indeed all one has to do is look at charts from last spring and a few weeks ago when hedgies were forced to liquidate positioning under “margin call, gentlemen” types of situations. Nobody wants that again, and the banks appear both coordinated and committed to ensure that the “carry” will not end the game.

This morning there is a potential early setup on the buy side. Even with are sharply higher open, players have been getting used to selling the open and getting long somewhere in the first hour for a walk the line rally. If players get caught trying this and the dealers come in on the buy side, look for significantly higher pricing in the first hour.

Finally, the final 2 hours of Friday’s session produced a significant volume increase in the SPminis and ER2 contract, when compared to their respective YTD and 5 day averages. Considering we settled on the highs of the session, this week looks potentially quite bullish.