Brian's Tuesday recap: 2x top in S&P? Plus: 2Y auction action

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Cyprus will not go silently into the dark night. Following the truly idiotic statement by Jeroen Dijsselbloem Monday that the Cyprus bail-in can be used as a template for other European banks in trouble. That sent a chill down the investors’ spines. The euro fell nearly two handles on the news. The decline was exacerbated with Jean-Claude Juncker’s statement that when the crisis is severe enough politicians have to lie. They know what to do, he said, but they do not know how to get re-elected after implementing the difficult choices. Also, North Korea is up to mischief. It has ordered its artillery division to be combat ready. This is in retaliation over South Korea - U.S. military exercises in the area. The DPRK sees it as a pretext for invasion.

Collective Intelligence! (Stock Trader's Almanac) Over the past 23 years the DJIA and S&P 500 have declined 17 times and advanced 7 with an average loss of about 1.0% near the end of March. Excluding advancing years, the average decline is right around 1.6% for DJIA and S&P 500. End-of-quarter portfolio restructuring likely plays a role as managers lock in gains and establish positions for the next quarter. These declines can begin on either the fourth-to-last trading day or the third. Today is the third-to-last trading day and a “bearish” icon is indicated above. Wednesday is also a “bearish” day based upon historical S&P 500 performance. Considering solid year-to-date gains (6th best DJIA Q1 since 1950), some profit-taking this week would not be surprising.

US TSYS/2Y: Treasuries dip lower with German Bunds on IMF/Italy comments and on pre-auction short-setting into $35B 2Y note auction. SMRA's John Canavan noted that the 2Y note auction has favorable cash flows: it will pay down about $1.57B due to a maturing $36.57B 2-year note, with also a $246M coupon interest payment tied to 2Y notes. The 1pm ET Wed 5Y note auction also has relatively favorable cash flows too given a maturing $20.57B 5-year notes and $2.95B coupon interest payment tied to 5-year notes. Meanwhile other traders don't see problems finding demand for the 2Y auction -- due to on/off safe-haven bid -- but the 5Y sale Wed, and 11:30am $29B 7Y auction Thur could be challenging, if for no other reason than holiday-thinned crowds. Some noted Jan TICS suggest central bk bid for Tsys esp. China. Keep in mind that SIFMA has early 2pm ET bond close Thu (1pm ET CME Tsy futures), and a full-day close Friday.

Don’t miss this guy > @princetontrader aka Mike V posted his Pivots http://t.co/3KTKpiv1OD Webcast http://t.co/blCfsxA2EL At (08:49CT) Mike posted his vol windows ES: 1558.50 x 1548.00 and NQ: 2807.75 x 2787.25.

Kathy has had some very good calls too! Charts posted by Kathy Garber @tbg4321. Harmonic rotations ESM3 has the help of emerging Bearish Bat to help form larger rotation's next leg http://bit.ly/14ly9Or NQ similar to ES, forming C point & has 2806.75 as important resistance test http://screencast.com/t/VwZf06C9B CL in dbl bearish PRZ (potential reversal zone) region, a hold below 95.55 has 95.19 initial support test tgt, 96.1 is the extreme of the zone http://screencast.com/t/ahyTIiifKM

During the Globex session the SPM traded in a four-handle range of 1551.40 - 1547.10. Traders were trying to shrug off the Eurozone concerns - Cyprus, Italy and Spain, to name a few. Chain store sales checked in below expectations and durable goods were mixed. Also, the opening imbalance showed an overall $394.41M x $85.26M.

Today’s SPM regular trading hours (RTH’s) gapped 4.5 handles higher. Consumer confidence checked in at 59.7 vs exp 68 and home sales were weak too, 411 vs exp 422. Combine today's data with Eurozone PMI's and we struggle to see why copper is holding as well as it is. During the opening hour of trade, the SPM traded in a 4-handle range. Mike V shared: the Bears need to kill 52 and the 47 lower level/3 dayer which was the launching pad at 8am ET. TR has Globex 56, upper level is 58.50, yest highs 60.5, if we do that the bulls better park it over 63 or its a 2x top. Don't forget the control zone, 48.75-45.75, win the zone, win the day, right now bulls winning, lotta day left.

The 2:45 closing imbalance showed the broader market with $200mil to sell. On the 3:00 cash close the SPM traded 1558 area before settling at 1557.20, up 10.3 handles, on the 3:15 futures close.

Brian Shepard is a 20-year exchange member of the CME Group.
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DISCLAIMER: The information and data in the above report were obtained from sources considered reliable. Opinions, market data, and recommendations are subject to change at any time. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any commodities or securities.

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