Welcome to 2013: Recovery Part Two. Watch Out for a Reversal Today… Strange Dynamics at Play $Study

Around the Globe

    Asia – CLOSED

  • Shanghai (China) +1.61%
  • Hang Seng (Hong Kong) +2.89%
  • Nikkei (Japan)+0.70%

Europe as of 6:40am EDT

  • DAX (Germany) +2.28%
  • FTSE (UK) +2.17%

Today’s Economic News:


Liking the PMI numbers out of the UK, a beat and a +50.  Germany, not so good, they need to start cycling higher.

Quote of the day:

No mind is so thoroughly well-organized that is deficient in a sense of humor.
–Samuel Taylor Coleridge

Current Breadth Readings: (click here to see all our breadth charts)


The Zweig is leading the way on the bounce.  Should we hold today’s gap, expect a soar today.


ES SP500 Futures Comments:

Short: 1458
long: 1435


These charts are as messed up as they can get.  Weird market hours, Gaps, News, Huge moves, Seasonals… We are looking forward to getting into the meat of January where the markets can roll and reveal a little easier.

From last Friday’s post market crash to the top just put in, it is nearly a 70 point move.  In percentage terms that is 4% in a very short amount of time.  Those bears are smarting now.   This gap up price brings us to the exhaustion point put in a few weeks ago (I think it was during the last Fed meeting).  We sold off from here and just now we are looking back.

We have a fairly similar setup going as we did in the Bin Laden high from March of 2011.   That Monday opened with a big gap, a high just after the market opened, and then a big correction.  This open today though has a running start from 4% back, that makes it a little different, but one would think 4% would need some rest.

The breadth numbers we use should start to build up some integrity over the next couple of days.  The start/stop and news cycle runs havoc on the signals we are trying to extract, and when other signals intercede, like news, they are really just noise as they are un-predictable and when the noise swamps out the signal, that makes reading very difficult.

Our breadth trenders have remained faithful to the bull side, moving just to neutral on one and bullish-neutral on the other and not flashing bear yet.  We talked about wanting to wait for the next rally up to read the market, well, that appears to be today.  The Friday rally into the close did a lot to right the ship but a day with follow-through is needed.

Eyes in for a reversal today if we continue to run higher.  We think the market should exhaust somewhere before 1460, our short area is at 1458.  On the downside, we are looking for a 50 – 70% hold on the gap, so we are looking in the 1435 area to find buyers.

Normal trading volume and advertised bids/asks should return to the ladders today, that should help us navigate intraday.

Watch those 10:30am Lows and any violation should be the end of a trend up day.

Welcome to 2013.  We think it is going to be a very good year.


US Dollar DX Futures Comments:

We like what the dollar is thinking here.  We have a $77 target down the road, but 79.50, then 79, have to go first.


TLT Twenty Year Bond ETF Comments:

TLT will be the one to watch today.  We have a target at 118.50 but our timing has needed patience, we would like to see that 120 broken today.



>>> Follow us @redliontrader<<<<<


DISCLAIMER: The information and data in the following report(s) 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. TTTHedge.com, its  officers, directors and its contributors may in the normal course of business, have position(s), which may or may not agree with the opinions expressed in this report. TTTHedge.com, its officers, and directors are not agents, representatives, or affiliates of the CME Group or any trading entity. Trading Futures, Options, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Any decision to purchase or sell as a result of the opinions expressed in these report(s) will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.