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Brian’s Turn: Market Recap.. From the floor of the CME

Brian Shepard

Last week, the equity markets were in a risk-off mode even as some economic data beat estimates. The DJIA and the broader S&P 500 both dropped about 2.%. The laggards of late, Nasdaq declined almost 3% while the DJT’s held firm - defending the 5000 level. Some reasons for the weakness were global growth concerns, Eurozone crisis, fiscal cliff, the debates, upcoming elections both here and abroad, summits and the looming earnings and warnings of late... None of it is new, it is just getting closer - which leads me to think of the old “Fear versus Greed” that runs the markets. The global equities lost ground last week after the World Bank and IMF cut their 2012 and 2013 global growth estimates. Maybe the point is - It's not who cut forecasts - its more about who didn't? Over the weekend China reported more supportive economic data with some reports offering a softer landing may be in the works... I wonder if that includes the Fiscal Cliff? It appears the politico’s are floating the idea of a resolution for the Fiscal Cliff being an extension of up to several months with congressional talks picking up following the election which would mandate quick bipartisan work. The indecision has spooked enough that it fast becoming the most conversed about unsettled event. Lending support in the premarket reports that Spain may ask late this month or by mid November - after deciding on a bailout once the ECB discloses the full details on the program and the elections are over. What comes to mind is the old “devil in the details.” Last week the buyers were content to stand on the sidelines, but now the equities are bouncing after breaching the lows of the recent range.

Morning observations:  A busy calendar this week with a big pickup in earnings reports,Goldman starts things off tomorrow premarket. Tomorrow night we look forward to the second Presidential Debate and later in the week the European summit. Following the global backstop of the sovereigns, aka QE the global economy has only managed modest gains. There has been many reports of the big gains on specific, a handful of days when the Central Banks have made accommodative measures public and now there has been plenty of reports regarding the sluggish start to the reporting season. Greed versus Fear. What happened to - chasing performance and the “Pain Trade”? With the calendar picking up this week and the expiration there should be plenty of news to lean on.

MrTS video: http://www.mrtopstep.com/10-15-2012-mark-sebastian-covering-options/
MrTS Charts: The OLD 1416/17 HIGHS / TESTED GLOBEX +13 from FRI 1420 PUNCH http://www.mrtopstep.com/mrtopstep-charts-major-inflection-stocks-to-bonds-spy-tlt-spz-1420/

Monday started with 257k ESZ and  1.3k SPZ traded on Globex, trading range 1430.10 – 1416.30 / Friday’s RTH’s, pit range was 1420.50 – 1433.80, settled at 1421.50 down 6.9 handles. Today’s RTH’s gapped nearly 5 handles higher to 1426.00 – 1426.50, traded 1427.90 and stepped lower to 1424.00 before retesting the OR and dropping to 1422.20 by 9:31CT. The following bounce tested 1425 and once again clawed its way higher as the banks and the financials showed early leadership following Citigroup's better earnings report premarket. However, here was no quick reversal as the mornings economic data was mixed. On the way down, the markets made made a series of lower lows and lower highs. So why should today's rally be any different, stepping higher with a series of higher highs and higher lows. The bulls took control throughout the morning and converted the 1431 area which we identify as one of the Ben’s. As in, that was the area that the spoos were trading when Ben Bernanke announced the Fed’s open ended backing. The afternoon session saw the same price action higher highs and higher lows as the 1436.50 HOD traded going into the close. The closing imbalance showed 24 of the Dow 30 to buy, decent size and the broader market showed a moderate $525M to the buy side. The cash close traded 1435.00 before settling at 1435.50, up 14 handles on the day.