As the markets cascaded yesterday on the confusing speech of Mr "big" Ben Bernanke, I asked myself how many HFTs entered short under the very visible 1075 support in the S&P 500? The SPUs collapsed once that level was breached and about 30k mini's were sold taking the cash down precipitously. When it hit support around the 1065 level (I thought that was weak support honestly) a bunch of my trader friends covered and went long - in looking at the action this morning, I should have done the same!
The action overnight in the SPs was strong. First, the market never breached the reactionary lows of the day session (at least not meaningfully). Second, the fact that they have taken the futures firmly through 1070 and filled the gap, argues that someone will be covering on such (they entered on the dive and probably used the gap for a stop level). As they march higher this morning, outperforming the European Bourses, which is not normal for a premarket move on no news, one has to wonder if a big trade, put on in the dive is forcing the SPs higher and if this action is sustainable.
With that said, earnings last night and so far this season have been strong so a rally or a continued move higher should be in the cards. That is if my stop gets tripped and I am positioned long! Till then, I am looking for some backing and filling. I do like the long side but based on the way things are going overnight, I am not so enthused about it. If we started from a lower base and climbed from there, I would be more bullish. One thing to remember - no market ever offers up the perfect setup so one has to take what Mr Market has to offer!
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