Yesterday when the Philly Fed number disappointed and the 10-year note yields moved down and the S&P took off to the upside, the 9:00 buy program showed us exactly what was going on. When we see buy programs on the half hour it usually means that mutual funds have stock to buy. The buying is executed electronically, buying baskets of stock on the half hour. When the big buy program hit at 9:00 and another buy program at 9:30 and 10:00 we knew there was a larger agenda and we pointed it out right away.
After rallying, the ESZ stalled and eventually sold off a few handles and then immediately bounced into new highs. The Pit Bull says when it goes slow and the ESZ13 trades in a narrow range or what we call chop, it is actually the buyers accumulating futures. It's really hard to fight a tape when it's like that.
Right now the S&P is still going up, but we do think that it may be nearing a threshold at the 1800 to 1850 level. Most traders we talk to think the S&P will correct in the first quarter and that a taper could come either at the end of December or going into the first Fed meeting in January.
As always, use stops and keep an eye on the 10-handle rule. Don't forget to catch MrTopStep on The Closing Print video found under the OptionsTV page (top bar). We report directly from the SPX pits, wrapping up the day and positioning for trade tomorrow.
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