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Brian's Monday recap: Sizing up the rally and the news and sentiment behind it

Brian Shepard

stockmarketwhisperer: Dallas Fed Manufacturing COLLAPSES ... why the hell is mrkt rallying on this?


Collective Intelligence!
A big shoutout to - The Day Trading Maestro Top Notch aka Tim Haefke @FuturesTNT - for another successful educational MrTopStep webinar last Saturday. Today Top Notch posted (11:43CT) one dimensional trade higher, but will short the NQ @ 2877.50, mini lead high from last year. However, proceeding with caution. Very bullish sentiment.

Tame Inflation to Keep Fed on Course http://on.wsj.com/18bOSBt Also, This keeps their easy money policy with the gas pedal on GO!. Just another facet of support for the energies. The oil markets are steady to higher amid this news. Our view is that it is likely to continue in this direction for the early part of Monday.

The euro is higher this morning on relief that Italy has formed a new government. Other than getting their house in order, the new leaders also have slated to reform the electoral system. The other euro members see this government as one that they can do business with. The White House is stepping up the thought process regarding Syrian intervention. The problem with aiding the rebels with air support is Syria’s state of the art aircraft defense system. This was installed clandestinely by the Russians. U.S. congressional leaders and the President, while not desirous of ground troops or more heavy involvement in another Middle East war, did call for a no-fly zone around the pariah state. They also suggested the supply of humanitarian aid - posted by Stanton Analytics.

Carley Garner (10:22CT) It feels like a lot of chasing here by the retail crowd. We don't trust the rally, but aren't willing to play the other side just yet. We might have another day of buying due to month end and light volume. We'd like to sell calls against a move to the mid to high 1590s in the next day or two if possible.

HEARD ON THE STREET: German Bonds Send Worrying Signal From one perspective, the euro-zone crisis is firmly in abeyance, with Spanish and Italian bond yields at their lowest since late 2010. But another crisis indicator is flashing red: German 10-year bond yields fell Monday to their lowest since July 2012. What can explain this? Jimmy Ticks offers: I'd more put it on capital allocation to fixed income (still was above equities), expansive monetary policy, search for yield.... in my view you'd have to be nuts to go chasing negative real yields - however the confidence in european corporates is just not there.

Harmonics from Kathy at http://structuraltrading.com: AAPL http://screencast.com/t/5Ilc5CMcaJ DX has ideal min retrace tgt 82.570, http://screencast.com/t/nagEAYE7f9 Kathy (08:56CT) NQ testing important resistance test 2854.5, a hold above there has 2867.5 tgt w/ scaling pt 2863.25, A hold below 2854.5 has important sup test tgt 2842.25 w/ scaling pt 2847.5. closer to 14755 for short reset. Kathy (09:38CT) ES completed sm bearish Bat suggesting stall or pb pt, failure to pb to ideal min retrace tgt 1581.5 has next upside tgt 1588.25. Premkt chart had 1586.5 tgt w/ hold above 1582.25 http://screencast.com/t/AciirgHvlX 1586.5 tgt hit. Kathy (09:55CT) SPY has failed to pb to ideal sup test 157.08, approaching initial resist tgt 159.27, above there has 159.71 tgt. A hold below 159.27 keeps the tgts at GRZ in play, premkt chart http://screencast.com/t/4ygHIBPHpyWa Kathy (10:01CT) DAX approaching important 7879.5 resist test DAX premkt chart: http://screencast.com/t/EoM5OsYa, current chart: http://screencast.com/t/HdOkdJAyo Kathy (10:15CT) CL breached dbl bearish PRZ (extreme 94.11) to tag next dbl bearish zone, the key is whether 94.11 holds as support or not, if not dnside tgt (ideal) is 93.5 region but scaling pts 93.87, 93.75 & 93.58. Premkt chart: http://screencast.com/t/ZEQWM96L current chart: http://screencast.com/t/M0mrTpxue

Monday’s S&P 500 trade started with 180k ESM and 700 SPM traded on Globex, trading range was 1583.10 – 15.74.50. Friday’s regular trading hours (RTH’s), pit session trading range was 1581.50 – 1573.00 before settling at 1576.50, down 5.2 handles. John Monaco (08:24CT) NYSE opening imbalance 75% BUY SIDE. More month end rebalancing / window dressing... www.mrtopstep.com click on the education tab, then click on trading rules 101.

The regular trading hours opening range was 1582.00 – 1582.50 topnotchtrading (08:58:13): Notice- the Nasdaq took out its high (2853.00) from last week in the first 15 minutes, curretn high of 2855.00 pit / 2854.25 mini, while the s&p is still 4+ handles away from its high of 1588.25 of last week. Question. Will the tech sector lift the s&p to higher ground? Pending home sales checked in higher, 1.5% vs est 1.0. redliontrader (09:09:02): opening 15 mins. today 4 handles, emini volume was 5.4KPM per minute which is average while the NYSE A/D, Advance/Decline lines were 3.28:1. There were 126 NYSE new high.

No pullbacks here stockmarketwhisperer (09:50CT) Dallas Fed Manufacturing COLLAPSES To - 15.6. Economists expected +5.0 after last month's +7.4 reading why the hell is mrkt rallying on this? (09:55CT) NYSE NHs 160 NYSE A/D 3:1. William Blount (10:28CT) Nasdaq aka NQ leading the way - its next big hurdle is the 2878 cash high - that is the post 2000 HIGH for the index and yes I would expect stops to go puke if THE SPOO is simultaneously taking out 1592.50 and on its way to the 1600 cash play. Top Notch (11:20CT) NQ- looking at last year lead month highs attained in September from a continuation chart. Big lead high of 2872.00, mini lead high of 2877.50. I like the chances to see the mini level today. The nazzy topped out at 2872 while the SPM held 1592 before fading back. The 1590 area was trading when the closing imbalance showed a small $130M to the buy side. On the cash close the SPM future traded 1588 area before settling at 1588.50, up .3 handles on the 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.