Lighter volume and an unwillingness to commit money to new positions characterize holiday-shortened trading weeks. Debt and agriculture futures at the Chicago Board of Trade close at noon Wednesday. All U.S. futures exchanges are closed Thursday for Thanksgiving, and futures markets are either closed or trade in shortened sessions Friday.
Click on any of the following links for the exchanges' exact holiday schedules:
Chicago Mercantile Exchange
New York Mercantile Exchange
New York Board of Trade
The reduced volume and participation in holiday-shortened weeks sometimes result in exaggerated moves. Fundamental conditions underpinning markets can be ignored, heightening the exigency of using technical analysis and tight stops. To that end, let's look at technical setups from five futures categories: equity index, debt, currencies, metals and meats.
Despite a setback in Tuesday's session, stock index futures continue to resonate as momentum markets. December
futures (NDZ2:CME) are leading the way, up as much as 42% off the October low. December
futures (DJZ2:CBOT) are also pulsing momentum, while the
are lagging behind slightly. Click the following links for articles to help either
trade momentum markets.
If stock index futures continue pulling back today, Wednesday and Friday, they will have traced classic, three-days-down, pullback-from-highs setups. That would prime them for potentially explosive moves Monday when the full cadre of active traders returns to their trading desks. Note that key support levels for potential defined-risk and early entry resides at 1090, 1077 and 1063 for the Nazz futures.
I mentioned in last week's
column that December
(USZ2:CBOT) were exhibiting signs of exhaustion of their multi-decade trend. A similar situation exists in benchmark December
(TYZ2:CBOT). Although debt is pulling back from lows in Tuesday's trading, both contracts are downside-momentum markets. T-bonds continued confirming this view by striking a new 10-day low Monday, while the 10-years recently forged a one-month low.
Note that debt and stock index futures have traded in opposite directions 80% of the time during the past six months. For the 10-years, 113 14/32, 113 20/32 and 114 0/32 stand out as resistance and areas to potentially get short off intraday pattern setups at higher levels.
In the currencies, the December
(JYZ2:CME) outside bar up that held support at the 61.8% retracement of the Oct. 18 through Nov. 12 rally suggests Monday's low could be a key level and portends further upside in this market.
Any rally in the yen will subdue the dollar's upside, which has been benefiting from breakdowns in the euro, Swiss franc and British pound. The action off the Nov. 11 low in the dollar remains constructive, but will be constrained by yen advances.
The meats have also been in momentum mode. Whether it's
listeria hysteria or a
technical breakout, December
(LHZ2:CME) have been one of the strongest momentum markets this autumn. January
(FCF2:CME) have also surged out of a low volatility situation and pullback noted on
Oct. 31 in what appears to be the third wave of a potential five-wave pattern.
Finally, in the metals, December
(SIZ2:COMEX) had a reversal of a reversal, indicating that the path of least resistance resides to the downside. Last Thursday, silver broke down to a three-week low in a wide-ranging bar. But on Friday, the market rallied with an upside wide-ranging bar and closed above Thursday's high, a strong indication that a reversal of the breakdown could be at hand. However, on Monday, we erased most of Friday's reversal bar. Today, silver is confirming Monday's reversal of a reversal by trading to a fresh three-week low and indicates that the path of least resistance is south.
Marc Dupee is an independent trader and co-author of the book
The Best: Conversations With Top Traders. Dupee was formerly markets analyst and futures editor for TradingMarkets Financial Group. At time of publication, he was short silver and bonds, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback to
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