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Brian's Thursday Recap: Swing traders barely breathing, overabundance of crude oil supplies, pipelines restored in Kirkuk

Brian Shepard


Collective Intelligence!

It appears that the pattern, which has developed over the last few weeks is fully in force. The European trading knocks the oil and products down on weak data and the longest recession since WWII. The Continent’s GDP declines by 0.2 percent last quarter. The overabundance of crude oil supplies is likely to cap a stout rally, but geopolitical events can trump that for the short-term. We had just such an incident Wednesday when the IAEA announced that talks with Iran have broken off. But in their typical rope-a-dope move, coined by the Greatest, Muhammad Ali is back to the fore. Iran, has come back Thursday to say that they are ready for nuclear talks with the West. This proposal put forth by Saeed Jalili who is a candidate for President and a negotiator in the process. 

After a pipeline blast in Kirkuk damage a major pipeline Tuesday flow has been restored. This should pressure the Brent somewhat vis-a-vis the arb. There is evidence that Japan’s Abenomics experiment is bearing fruit. This may increase the demand for oil at the margins. It also appears that threat of an extended period of heat will support nat gas prices in the short run - posted by Henry, Stanton Analytics (06:59am CT). Henry’s update posted at (10:09) Crude - Initial target is 95.50 to 95.60. Still a strong market retraces are shallow - should pause at this area. Sam E (10:11) concurs - I won't get short this crude till I see 95.76ish thats the spot - will see some sellers at 95.52 also. 

*WSJ'S HILSENRATH: Preferred Fed Inflation Measure May Be Understated. Data Quirks May Ease Fed's Mind on Inflation. Fed Not Ringing Inflation Alarm Bells.

 Regarding the gold short from 1465/68 posted here early last week: If you scaled out of some yesterday or moved stops down, I would recommend at this time keeping stops as is or only scaling down a few dollars. Target the april lows now (1325/30ish) on the trailers - posted by Matt Z at  (09:57). 

Expirys usually trade both ways in my experience. HITMANGOLF shared some traders sentiment with us > not sure if you're seeing the same thing but I got a lot of emotional im/emails into todays (Wednesday’s 1659.50) high --  Maybe I should check to see what is posted at www.mrtopstep.com ;). While you are visiting - be sure to click on the education tab and check the webinars for your particular interest. 

Took some heat yesterday, but swing traders are breathing ok today! “We are coming into the week bearish the ES and bullish Treasuries (short ES calls and short ZB puts). We are recommending that our clients sell the July ZB 140 puts for 25 to 28 ticks. This strike has tripled in value in a few days...if we bounce or consolidate, they stand to lose value quickly” - posted by Carley Garner earlier in the week.   

Oh yea, we need to add - the current administration and John Q. Public’s growing mistrust...The following is sage advice: Roger Volz the monthly... quarterlies have a lot of room - let the market make a top then will have plenty of room to downside. Downside catalyst? Have congress murmur capital gains tax increase/ HFT trading fee increase or some type of financial tax will put cold water on this pronto... 

MrTopStep Webinar! Join PivotBoss this Saturday as he reveals his approach for forecasting accurate targets with the ADR method, for real-time and swing trading http://bit.ly/18IMULL 

My dental work is better than my chart work lately... So, I pay attention to the harmonics from Kathy at http://structuraltrading.com  rotations:  

Kathy (10:05) CL approaching bearish Bat PRZ 95.59, premkt chart  http://screencast.com/t/gn7ji3B7Em9H current chart http://screencast.com/t/BoadVqbsa7O

Kathy (10:08) NQ initial test of dbl bearish PRZ 3015.75 had pb to sig lvl 3002.13, a hold above 3008.25 implies retest of PRZ premkt chart http://screencast.com/t/QCeXWjtLo0 current chart http://screencast.com/t/RCAuqpHT21Gg

Kathy (10:12) ES holding below lg pitchfork midline, currently in triangluar contraction, sig lvls to brk & hold beyond the triangle are 1657.5 or 1650, premkt chart http://screencast.com/t/iZTjhsBEXS current chart: http://screencast.com/t/tig6QE4p

Today’s S&P 500 trade started with 230k ESM and 1.1k SPM traded on Globex, trading range was 1656.50 – 1650.20, Goldman was a small buyer on the open. Wednesday’s regular trading hours (RTH’s), pit session trading range was 1659.50 – 1644.50 before settling at 1654.30 up 6.3 handles. Unemployment claims checked in worse than expected - 360k vs 332k survey. The bond market started their roll and JUNE crude expired today. 

The regular trading hours opened 1.5 handles lower at 1652.70 -1653.0. The Nasdaq was leading while both the S&P and [DJIA] were lagging in the opening 15 minutes. redliontrader (09:08) [NYSE] 257 new 52wk highs.. same old there, OEX put/call 1;5:1, neutral. NYSE a/d -1.75:1.. how about that negative NYSE A/D, Advance/Decline and still we are making new 52 week highs in big numbers.. the leading peloton is pulling away from the pack. The Russell 2000, [RUT] firmed up leading the equities to new intraday highs, but the SPM topped at 1658.50 - shy of yesterday’s fresh contract high of 1659.50. Looking for a high? We have several events lining up after tomorrow’s expiration and chatter of some profit taking was making the rounds. May 22nd the BOJ, Bank of Japan decision/press conference, Bernanke testimony, FOMC minutes. China flash PMIs later that night followed by the European and U.S. data Thursday’s morning, May 23rd. Also, June 22nd the Bradley Model has its turning point or some time in July http://yhoo.it/18NXaTd

 After printing an early low of 1651.00 at 9:08 the S&P continued the trend of grinding higher, printing 1658.50 at 10:16 followed by a low volume retest resulting in a double top at 1658.50 the SPM faded back to hold 1654.50 before trading quietly sideways to slightly higher through the midday. Top Notch (13:51)

If Mr. Fibonacci has his way, this current all time high of 1659.30 pit / 1595.75 mini will stand and lead a retracement back to targets of 1642.70, 1638.70, & objective point of 1629.30. That scenario stays intact as long as the S&P settles under the 1654.50 price on a daily basis. Mid-afternoon weakness took the S&P through the opening range and through the morning low on a pick up in volume. Sell programs elected sell stops as the SPM dropped 10 handles between 1:30-2:30CT trading a new intraday low of 1646.50 - yesterday's low holding above 1644.50. The SPM was trading 1648 area when the closing imbalance showed a small $250M to the sell side. Morgan stanley sold up to 1k SPM, big S&P in the pit from 2:30 - 3:30. The cash close traded 1648.20 area before the futures settled at 1648.10, down 6.2 handles. DJIA has been down nineteen of the last thirty-one May expiration days with an average loss of 0.22%"/ Stock Traders Almanac.


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.{jathumbnailoff}