Monday, November 3, 2014

E-Mini S&P; 12 Consecutive New Highs- A TOP or NOT

Today marked a 12th consecutive session new E-mini high.    In the last 5 years, there has never been as long a lasting succession of consecutive new session highs for the nearest to expiry S&P E-mini.  A natural human instinct is a want to be the brightest trader out there and ‘guess’ that 12 consecutive new highs is the limit and a short is the appropriate position. 

Instead, the technical conditions are not as ‘stretched’ as this indicator alone might suggest.  The recovery that is attached to the 12 session advance follows the largest percentage decline since August 2011.  As such, we might well recognize there is little in the way of intermediate-term overbought conditions despite the advance which has recaptured more than the 9.5% decline over the mid-August to mid-October period.   

Cautious traders or tactical longs who entered nearer to the ‘Tweezers Bottom’ pointed out in the enclosed chart might consider paring back long positions, but there is otherwise little reason to discount the prospects for a more protracted advance.

One cautionary note is worth consideration.  The difference between open and current ESZ4 price is very small and could form a ‘spinning top’ or a ‘doji’.  This would demand that vigilance is attended in any long positions as this development would come at a level quite near the previous mid-August high.

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