|
|||
|
April 25, 2010 The Broad Benchmark U.S. Index, the S&P 500 resumed its13-month rally by closing the week at a new 52 week high. Friday, April 19th, witnessed the equity markets declined after the SEC charged Goldman Sachs with fraud. However, this week market participants were focused on the 85 components of the S&P 500 that reported first quarter earnings. Most exceeded expectations. However, the number that beat revenue expectations was impressive. The number of companies that missed on their top line were few and only modestly below expectations. Broad base positive bias carried over to the small-cap stocks, as evidenced by the Russell 2000 outperforming the S&P 500 with gains 3.8% versus 2.1%. Cyclical sectors advanced this week, led by energy (+4.2%) and consumer discretionary (+4.1%), while noncyclical sectors underperformed, most notably health care (-0.9%). First quarter earnings will continue to dominate the headlines next week. There will also be two major economic events on calendar next week. The major event will be the release of the FOMC rate decision and policy directive on Wednesday: followed by the first quarter GDP report released on Friday. The U.S. Treasury auctions will resume following a two-week break. There will be an $11 billion 5-year TIPS auction on Monday, followed by $118 billion of 2-, 5- and 7-year Notes during the middle of the week. Technical Perceptive The April 16th decline found support on Monday, as demand enters the market at 1180. The 1180 reference points goes back to April 8th rally off 1170, where price pull-back during J-period. On late April 9th the S&P June futures found during B-period support at 1183. On Monday, buying interested established a new base of support for this current phase of market development, as responsive buying was consistently present during the mid-day session probe to 1180. J-period witnessed a short covering rally through Monday’s range with price trading up to 1196 at the close. On Tuesday; the S&P traded above the previous day’s high, re-tested the April 16th high at 1206 and closed the session at the high of the day. Wednesday, the S&P traded up to 1207 at the open, and traded down to 1195, before closing back within the previous day range. The secondary reaction to the ret-test of resistance at 1207, which was observed Wednesday, continued during Thursday session. The S&P opened below Wednesday’s settlement and sold down to 1186, modestly above Monday’s low. The selling pressure pause at the low during remained of the opening range. There was no re-test of the of the A-period low. During H-period, the failure to make a lower low gave way to a short covering rally, which continued through M-period at which point the S&P traded up to the prior day’s high. Friday, the S&P found minor support at 1201, the low of prior day’s settlement range. The price action consolidated between opening range: 1201 A-period low, 1210 B-period high. Late-in-the day, price broke-out above 1210 and traded up to 1213. The S&P June Futures close the 1212, a new 52 week high. Technical Reference Points for June S&P Futures Contract Up-side target for Q1 earnings season is 1221, the September 2008 Resistance 1213, April 25th High, June Futures, new 52 Week High [1217 CASH] Support 1186, April 22nd Low 1180, April 19th Low 1171, April 8th Low 1161, March 31st Close 1156, near term support March 26 Daily Low 1148, Major Support March 22nd low, the FOMC Low 1136, March 15th Daily Low If the ideas and concepts of auction market theory appeal to you and you would like more information, you are invited to visit our website at www.IOAMT .com. The broad benchmark S&P 500 rallied to a new 52 Week High and close the session in an extreme bias the buy side. The rally started in the overnight session with the S&P June futures trading up to the psychology 1200 price level. The price pulled back off the overnight Globex high trading down4 points to 1196. The buying response at 1196 was observable as price moved up off the low and traded above the A-period high to a new high at 1202, following which there was a minor pull-back to 1200. Statistical high volume was transacted with the 2 points range. The order flow indicated the executions were computer generated multi-scale machine code algorithm as discussed in Sunday’s Weekly Review. The algorithm continued to execute with a bullish bias, i.e. responsive buying absorbing supply on the down tick. The minor pull-back were micro periods where the initiated selling that would appear at each probe to a new high would convert to long as buying interest continue to initialed. Demand dominated supply continuously. During M-period price traded up to a higher high, extending the daily range by 3 points. The buying interested was attributed to positive quarterly results from a couple of key industry players and some strong consumer spending. Tech bellwether Intel announced overnight that it has exceeded Wall Street’s consensus estimate: earnings of $0.43 per share on $10.3 billion in revenue to. Intel issued a strong positive guidance going forward into its second fiscal quarter. The Philadelphia Semiconductor Index was up 4.3%, its best percentage gain in almost nine months, to a new 52-week high of its own. JPM Chase beat the consensus estimates for its first quarter earnings of $0.74 per share and revenue of $28.2 billion. JPM posted their best single-session percentage gain in six months. Bank of America reports Friday morning. Despite such an impressive feat, the market is both technically and fundamentally overbought and for correction. The market has advanced more than 15% from its February low and more than 80% since it set multiyear lows in March 2009. The gains are certainly supported with data indicating broad based buying interest: the strongest bullish expression of conviction, “bid” the prices higher. Regardless what matrix you use, stocks are over brought. However, stocks can remain over brought for long periods of time. Earnings have just started, earnings are positive; the merchandizing has just got under way. On the Consumer side, CPI for March increased 0.1% month-over-month. That was in-line with expectations. Excluding food and energy, consumer prices were flat for the month, but the consensus had called for a 0.1% increase in core consumer prices. Retail sales for March increased 1.6%, which exceeded the 1.2% increase that had been widely forecast. Cool consumer prices and no mention of inflationary pressures in the latest Fed Beige Book left the dollar without much support, especially as participants showed less interest in defensive-oriented holdings. Instead, the buck fell to a 0.4% loss against competing currencies. Fed Chairman Bernanke testified before the Joint Economic Committee today. Bernanke said he is particularly concerned about the fact that in March 44% of the unemployed had been without a job for six months or more, but offered no new position on Fed thinking. Technical Reference Points for June S&P Futures Contract Potential Next Up-side Trading Range Resistance 1221, September 23, 2008 High 1207, April 14, 2010, a new 52 Week High Support 1185, minor, March 13th Low 1183, minor March 9th Low 1173, March 7th Low 1165, March 31st Close 1155, near term support March 26 Daily Low 1148, Major Support March 22nd low, the FOMC Low 1136, March 15th Daily Low 1134, March 9th initiated buying M-period, March 10th Daily Low, March 11th Daily Low 1125, the upper parameter of the 3-day distribution, March 2nd thru March 4th 1116, the lower parameter of the 3-day distribution, March 2nd thru March 4th 1105, minor, once tested, the February 26th settlement, overnight low 1086, the February 25th daily low 1078, February 16th low and the upper limit of weeklong consolidation range 1044 February 5th Correction Low [Cash Index] If the ideas and concepts of auction market theory appeal to you and you would like more information, you are invited to visit our website at www.IAOMT .com. S&P June Futures has pulled back off the recently made high at 1194 and test Friday’s break-out point at 1188 during the pre-market session The pull-back encountered responsive buying during the overnight session. Support held and price traded back to Monday’s settlement at 1192. The negative overnight bias was attributed to disappointing quarterly results from Alcoa. The Dow component posted in-line adjusted earnings but its smaller-than-expected revenue: raising questions regarding demand. The retracement back to settlement failed to attack buying interest and price sold off from 1192 and trade back to the overnight low at 1188. Selling pressure increased during B-period and continued until the end of C-period, with price trading down to 1185, just above Friday’s low at 1183. Following the initial sell-off, each subsequent reattachment off the low failed to elicit a sell response. Previous short covered and price slowly traded high until L-period, which terminated at Monday’s high 1196. Price pull-back off the high and settled the session at 1193. First quarter results from Alcoa unofficially marked the start earnings season. Fellow Dow component JPMorgan Chase is scheduled to report its latest quarterly results tomorrow morning, ahead of the opening bell. Regional bank stocks were especially weak. The group declined 2.0% following the decision by analysts at UBS to downgrade. Participants BID Intel to a fresh 52-week high ahead of its post-close earnings announcement. Shares of the semiconductor giant helped give the Semiconductor Index a 0.6% gain and the Nasdaq Composite trade up to fractionally improved 52-week high. Technical Reference Points for June S&P Futures Contract Potential Next Up-side Trading Range 1221, September 23, 2008 High 1200, Monday’s projected high Resistance 1193 June Futures, April 9th new 52 Week High [1194 CASH] Support 1185, minor, March 13th Low 1183, minor March 9th Low 1173, March 7th Low 1165, March 31st Close 1155, near term support March 26 Daily Low 1148, Major Support March 22nd low, the FOMC Low 1136, March 15th Daily Low 1134, March 9th initiated buying M-period, March 10th Daily Low, March 11th Daily Low 1125, the upper parameter of the 3-day distribution, March 2nd thru March 4th 1116, the lower parameter of the 3-day distribution, March 2nd thru March 4th 1105, minor, once tested, the February 26th settlement, overnight low 1086, the February 25th daily low 1078, February 16th low and the upper limit of weeklong consolidation range 1044 February 5th Correction Low [Cash Index] If the ideas and concepts of auction market theory appeal to you and you would like more information, you are invited to visit our website at www.IAOMT .com. March 9, 2010 This week started off with the S&P breaking out above its previous 52 week high at 1177 and went on to continue its recovery rally ending this week’s session at a new high: 1193 in the S&P June futures: 1194 in the CASH Index. Like everything in nature Markets change and evolve over time. As technology has come to play a greater role in market, computerized order execution has become more dominate. This week price action appeared to be result of computerized order execution occurring in narrower range structures and for longer period of time than at any point in the S&P recent history. The result of this latest technological evolution has given rise to the most limited opportunity for individual S&P eMini traders than I have witnessed before. The purpose of a market is to facilitate trade. In order to profit from participating in a market a trading range is required. Periods of narrow range high density volume execution do not favor activity participation. The firms who executed trades using computer algorithms dominate the price action. The risk rewards ratio offers no opportunity to the individual participants. In order to illustrate the difficulty in discriminating the data series during periods of high volume density computer generated order flow execution, I will begin with a description of Monday’s price action. The machine code computerize algorithm execution began on Monday, as price traded up to a new high. The break-out above the previous 52 week high at 1177 was still within the parameters of normal market development. Then, in C-period price traded up to 1184 and encountered statistical high volume in the form of responsive selling. At that point the order flow structure executed trades within a narrow 3 point range between 1184 and 1181until the close of Monday’s session. Monday’s data series provides us with examples statistical high volume density order flow execution wherein the BID ASK dynamic, i.e. the interaction between initiated buying and responsive selling, and or initiated selling and responsive buying offer no clear opportunity. In other words, at the close of Monday session the S&P was neutral at the new high, in an extremely narrow range .The price action was so unusually that I noted in Monday’s blog, it appeared as if market markers were trading among themselves. Tuesday: The S&P traded below Monday’s settlement, auction down to 1178, at or near the previous high. Buying interest was present at the open, the A-period low. Price traded back up into Monday’s narrow range cluster and from C-period thru I- period the same machine code computerize algorithm execution started again. In J-period price broke-out above the narrow range high and traded up to 1188. There was a minor pull-back to the point where the initiated buying first entered the order flow and price close the session at 1186. Wednesday: The S&P sold below Tuesday settlement during the overnight Globex session. The opening range was between 1185 and 1181. Minor range extension occurred during C-period and price auction down to 1178 and found support at/or near Tuesday’s low. Price traded up to 1183 and went FLAT until H-period when price traded up to Tuesday’s settlement at 1186. The lack of buying interest was evident and selling pressure entered the order flow driving price down to re-test the open range low at 1178. Selling pressure increased during L-period which witnessed a break-down below the open range low. Price traded down to 1173 and found support at the March 1st settlement. A subsequent up tick off 1173 witness previous sellers cover their positions and price closed at 1178. The development through Wednesday would lead an observer to interpret the price action at the Monday and Tuesday’s high as a form of commercial capping, i.e. establishing at upper limit. However, Bayesian logic would argue that Wednesday’s pull-back was aloes the first test minor support at the March 1st low, the starting point of the recent development that resulted in the newly made 52 week high. Therefore, if a subsequent probe back to Wednesday’s low 1173 found support conditional probability would favor a potential re-test of the high. The logic being: a pull-back to support following a new high off would represent the first opportunity for buyers to get aboard the developing trend. Indeed, Thursday’s open re-tested the March 1st low. There was minor selling pressure down to 1171 that meet with responsive buying. All S&P sectors ended their initial decline after the 1st hour of Thursday’s session. Buying interest increased and price rallied off the open range low and price traded back up to 1185. During Friday’s session price traded up to Tuesday’s high during B-period. The opening range was 5 point: 1183 the low, 1185 the high. At that point, the same computerize algorithmic order execution witnessed earlier in the week once again dominated the auction. The machine was back in control. The pattern of the order flow execution occurred within a 5 point distribution. The value area with 3 points and the order flow rotation was limited to 2 points. The narrow trade range oscillated between initiated buying and responsive selling entering at high volume density. At the end of Friday’s session initiated buying dominated and price broke out above the upper limit during M-period and the S&P June futures contract closed the week at a new 52 Week high. High volume density order execution, within a narrow range makes it difficult to visualize to the outcome of BID / ASK dynamic, i.e. the interaction between buyers and sellers. The observer’s ability to provide intuitive interpretation as to the directional outcome is limited. High volume density order execution transacted within the limited parameters of a 5 point distribution limits the distance above and below the mean is 2.5 points. The rotations within 30 minute samples occurred within 2.5 point ranges. The machines algorithms executed with precisions. Order flow shift were visually perceptible but manual execution against the machines algorithms was difficult. The risk reward ratios were limited. The limited reward and lack of movement is the proto-typical definition of poor trade facilitation. Description of this type of machine code has appeared in academic literature under the broad topic of Kernel Development. Advanced software application like Math-Lab and Mathamatica contain code for such equations in their library functions. http://mathworld.wolfram.com/QuadraticEquation.html http://mathworld.wolfram.com/KernelPolynomial.html In order to model the results of nonlinear movement within the order flow and to determine the structure of nonlinear kernel development a new visualizations method must be developed. Articles on time series prediction algorithm based on least squares support vector machine languages have been published in the Journal of Central South University of Technology. Many times you will come across equations that are not easy to factor or solve. In those cases, there is a special formula called the quadratic formulas that are used to solve such problems. The price series that we have observed would be described as follows: A series of many numbers: a polynomial In theory, a kernel function could be used to represent the core density of the supply demand cluster: Kernel functions play an increasingly important role in Machine Learning, Pattern Recognition and their applications. http://www.springerlink.com/content/f07m327r45151535/ http://www.amazon.com/Pattern-Recognition-Learning-Information-Statistics/dp/0387310738 http://demonstrations.wolfram.com/EstimatingTheLocalMeanFunction/ http://mathworld.wolfram.com/K-MeansClusteringAlgorithm.html http://mathworld.wolfram.com/NonparametricEstimation.html A method for determining the forces of supply and demand curve is called an optimizing predictive controller. Thus the code exits to construct a polynomial kernel function approximator that could be used for optimizing predictive accuracy of the shifts in order flow bias: BID to Offer/ Offer to BID supporting the micro structure. Vector machine languages supports programming a polynomial kernel function approximator based nonlinear model. A support vector machine based predictive model of the high volume density order flow execution could be established. This is obviously not the kind of thing anyone is going to program in Trade Station. Even if such a model could be constructed, the question remains what would you do with it? For example; in the context of Monday’s price action the standard frequency distribution indicated a bias to the buy side. Indeed, the S&P closed the session at the high. Still once the machine algorithm was turned off and the afterhours Globex session started, price sold off from its high. During Friday’s session visual observation was sufficient to intuitively infer the late in the day breakout to the new high. Never the less, in the light of the limited intraday opportunities current available in the S&P as a result of the high volume narrow range order execution algorithm, I have discussed with several members the benefits of looking at alternative markets. I have started to create a chart book of the EURO contract. My initial reach will include the standard drill down from the long term perspective to the current market condition. Soon I will start posting charts on the website. After the workshops I will host an afterhour’s open forum to discuss the research with IOAMT members. Technical Reference Points for June S&P Futures Contract Potential Next Up-side Trading Range 1221, September 23, 2008 High 1200, Monday’s projected high Resistance 1193 June Futures, April 9th new 52 Week High [1194 CASH] Support 1173, March 7th Low, minor 1165, March 31st Close 1155, near term support March 26 Daily Low 1148, Major Support March 22nd low, the FOMC Low 1136, March 15th Daily Low 1134, March 9th initiated buying M-period, March 10th Daily Low, March 11th Daily Low 1125, the upper parameter of the 3-day distribution, March 2nd thru March 4th 1116, the lower parameter of the 3-day distribution, March 2nd thru March 4th 1105, minor, once tested, the February 26th settlement, overnight low 1086, the February 25th daily low 1078, February 16th low and the upper limit of weeklong consolidation range 1044 February 5th Correction Low [Cash Index] If the ideas and concepts of auction market theory appeal to you and you would like more information, you are invited to visit our website at www.IAOMT .com.
Following two days of high volume density algorithmic price action at 1188, newly made 52 week high, S&P future traded below Tuesday’s settlement in the afterhours Globex session. Selling pressure in the Globex session correlated with a rally in the dollar which extends its gains from the prior session, +.4% gain against a basket of competing currencies. Broad based profit taking was evidenced at the open in all sectors with the exception of the financials. The attempt to auction back to Tuesday’s settlement at 1186 during A-period meet with selling pressure and price sold down to 1179 during C-period and found support at/ or near yesterday’s low. The retracement during D-period back up to 1183, witnessed more narrow range computers generated algorithmic price action until H-period when the S&P attempt to trade into positive territory and auctioned up to 1186. The H-period probe to settlement encountered responsive selling and initiated buyer existed positions as price pull-back off the H-period high. Selling pressure increased during J-period, as the financials gave up their modest gains. After pausing at the 1179, the C-period low, Price broke down during L-period. The selling pressures drove the S&P future down to 1173, the April 1st settlement. Responsive buying capped the decline and short covered into the close at 1179. All 10 major sectors ended today’s session in negative territory. Today’s strength in the Dollar Index was mostly due to weakness in the Euro, which was attributed to fourth quarter economic stagnation in the euro-zone. Contributing to the profit taking that dominated the morning session was the fact that consumer credit in February fell by $11.5 billion. It was expected to contract by just $0.7 billion. Consumer credit for the prior month was revised upward to a $10.6 billion increase from a $5.0 billion increase. Today’s $21 billion auction of 10-year Treasuries drew a lower-than-expected yield of 3.90% and a record bid-to-cover ratio of 3.7. Gold prices climbed 1.5% to $1137 per ounce, while silver prices settled 1.5% higher at $18.20 per ounce. Advancing Sectors: (None) Declining Sectors: Telecom (-2.3%), Energy (-1.0%), Utilities (-0.9%), Materials (-0.7%), Industrials (-0.6%), Financials (-0.5%), Consumer Discretionary (-0.5%), Consumer Staples (-0.5%), Health Care (-0.4%), Tech (-0.2%) Technical Reference Points for June S&P Futures Contract Potential Next Up-side Trading Range 1221, September 23, 2008 High Resistance 1188 June Futures, April 5st the new 52 Week High [1191 CASH] Support 1173, March 7th Low, minor 1165, March 31st Close 1155, near term support March 26 Daily Low 1148, Major Support March 22nd low, the FOMC Low 1136, March 15th Daily Low 1134, March 9th initiated buying M-period, March 10th Daily Low, March 11th Daily Low 1125, the upper parameter of the 3-day distribution, March 2nd thru March 4th 1116, the lower parameter of the 3-day distribution, March 2nd thru March 4th 1105, minor, once tested, the February 26th settlement, overnight low 1086, the February 25th daily low 1078, February 16th low and the upper limit of weeklong consolidation range 1044 February 5th Correction Low [Cash Index] If the ideas and concepts of auction market theory appeal to you and you would like more information, you are invited to visit our website at www.IAOMT .com. |
||
|
Copyright © 2012 IOAMT Blog - All Rights Reserved |
|||
