TradeStalker’s

R.B.I. Trader’s Update

6 / 17 / 2009

(Published Since 1996)

The market opened flat on Wednesday and then the ES popped up and reversed from 909.25 in the first 10 minutes and reversed. A bounce off of 902.50 support failed at 907.50 and the downside resumed. After going under and then back up through the 900 level, buying came in and the market worked its way higher into the afternoon. The ES stopped, stalled, then reversed from the 913.75-914.00 resistance zone. The market then stair-stepped its way lower to close on a down note.

The daily overbought/oversold indicators are now at short term extremes. The market isn’t acting great, but when the market gets in this position it normally sets the stage for a rally. On the times I get these extreme readings and the market doesn’t rally within a day or 2 (at the most, normally sooner), it means the market is very weak and being oversold simply doesn’t matter. The way it looks after the Wednesday action, a 2 sided trading day may be the best the market can muster on Thursday unless there is a spark to light the oversold fumes.

On Thursday there is the Initial Claims number before the open, and then the Leading Indicators and Philly Fed release 30 minutes into the trading day. If there is early strength, it will likely set up another good short under the initial resistance levels. On the downside, it looks like a test of the Wednesday lows would need to quickly reverse, and stay over the 900 level on the ES to get a decent bounce to trade from the long side. If the ES cannot reverse and stay over that 900 level, then a drop towards the 892.50-891.50 is likely in the cards. The major support, should the market get hit with another hard selloff, is down at the 877.50- 875.50 area on the ES. That is a transition area and if that area is tested, the market would need to reverse and not look back to avoid a bigger break-down.

Good Trading,

Mike Reed

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