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Call it what you like, a relief rally, false relief, or temporary. You can use whatever word you want to describe the explosive up move. Good, bad or indifferent, the S&P is up 4.3% in the past two sessions. It doesn't matter what’s going to happen next week or next month, it’s what’s going on right now. 

Chart by Equity Clock 

After weeks of uncertainty, the S&P 500 futures have broken out to the upside. The stats over the last two days are off the map. The bulls took command after last Friday’s selloff and have not let up.  The level of buying is among the biggest we have seen in a few years and it showed up in today’s opening and closing imbalances, where almost $4bil was put to work in the broader market. When you add up the Dow and NASDAQ buy imbalance and throw in all the short covering and buy stops above the markets, the buy programs were firing away, one after another. After the sharply higher open yesterday and a little up move, the SPH started to sell off, but there was never any actual selling. It was all computerized, and once the “little” sell programs were over, the short covering rally and all the big MOCs helped pushed the futures up to new highs in another stunning late-day rip to the upside. After running all the sell stops from 1400 down to 1383.50 last Friday, two days later the S&P futures are running buy stops above 1450. According to Lowry's,  the strong advance implies that Monday’s rally confirms the establishment of a bottom from the mid-November low. Lowry’s points out that the market has embarked on another leg to the upside but also said that yesterday's strong advance suggests some buying exhaustion  ...

Real buying: In the end, the S&P futures saw their biggest gain in more than a year, up 2.5%. All 10 S&P sectors rose at least 1.8%. All of the Dow 30 closed higher during yesterday 308 point or 2.4% gain. The NASDAQ comp closed up a whopping 3.1%. Last year the S&P closed up 13% and is now up 111% since the March 9, 2009, lows. The S&P is now fractionally below (0.02%) a five-year high set in September and only 7% off its all-time record high set in October 2007, when it traded 1565.   

Breadth Needs One More Day…
by Marlin Cobb

There was that pent-up energy … It only took one day and our breadth charts are back into solid bull.  They never really left their bull test, it was more a test of patience, waiting for a bounce to analyze.  That is what breadth people do and what excites them the most, moves and thrusts.

So without boring you too much, my prime chart is the Zweig Breadth Thrust chart.  This chart is the 10-day average of the NYSE advance/decline line.  We want this line to go overbought in here as it will signal to us that money is chasing price even at these high levels, and instill confidence for a longer hold on the long side. Overbought would be above the 61.5 line.

Chart 2 today is the Cumulative Volume Index.  This chart, for the most part, is useless until it comes to these big moves and we can rate the quality of the move.  Had we bounced higher on lower volume, we would be scrambling for more short-able evidence. What has us bulls happy here is that positive slope on the red line.

Conclusions: The bullish trend that started mid-November continues into the new year.  We would like follow-through … we always like follow-through, as it is confirmation.   The follow-through tacked onto the end of yesterday, pushing it higher into a trend day up close, makes us confident.  The S&P did do a 4% pullback over the last half of December, but there was not a lot of volume and most buyers around mid-December are just seeing green again, in other words, you need to be blind to the size of the pullback and realize that trend remains intact.   We are actively looking for a top and do not see it yet.

Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985. 

Our view: The S&P is up 75 handles since last Friday’s 1383.50 low. There are a lot of economic reports out this morning, ADP and the FOMC today and the jobs number tomorrow. With that in mind, the S&P may be in for a pause. Do we think the rally is over? NO! As always, keep an eye on the 10 handle rule and please use stops when trading futures.

  • It’s 7:15 a.m. and the ESH is trading 1452.75, down 4.25 handles; crude is downn 39 cents at 92.73; and the euro is downn 75 pips at 1.3109.
  • In Asia, 10 out of 11 markets closed higher (Shanghai Comp + 1.61%, Hang Seng +0.37%).
  • In Europe, 10 out of 12 markets are trading lower (CAC -0.63%, DAX -0.29%).
  • Today’s headline: “Yen Moves Higher, S&P Futures Seen Lower”
  • Economic calendar: Today:  Challenger job-cut report, ADP employment report, jobless claims, FOMC minutes, Fed balance sheet/money supply, chain store sales, auto sales; earnings from Family Dollar. FRIDAY: Employment situation, factory orders, ISM non-mfg index, oil inventories, Fed's Yellen speaks; earnings from Mosaic
  • Total volume: 1.93mil ESH and 18.7k SPH traded
  • Fair value: S&P -2.25, NASDAQ -4.75
  • MrTopStep Closing Print Video: http://www.mrtopstep.com/videos/?id=37112

From the MTS IM Pro chatroom: 

Suzie is mad as hell with those senators/politicians that actually tweeted breaking news and interact with their Twitter followers. The House, Republicans list is much longer, I might get it all into one email and send it en-masse. You really want to get pissed, check out the House and Senate pension plan. Mose reiterates the use of term limits - two Senate and 6 House MAXIMUM. Schumer has NEVER had a real job and been in the Senate 37 YEARS! Remember Schumer and the run on IndyMac cost shareholders $6 billion? http://tinyurl.com/a9nt4ox  Politicians run their mouth(s) and you're up 24/7.   

What really upsets us traders is that we trade for a living -- to feed our families -- and we trade prudently to protect our own as well as our clients’ nest eggs -- their futures -- and one wrong word from some politician in Washington can wipe out a significant chunk of our life. We have literally been held hostage. Even though I am fully capable and willing to trade both ways ... I am just sick of it. We should not have to stay up around the clock monitoring what they are saying/doing so we know what we are facing from day to day/hour to hour. Lastly, thank you for offering the MrTopStep platform, where traders can and do back each other up!

Suzie, thank you for sharing as most traders surely feel the same.    





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