Market Indices Finished Higher on Monday
Sometimes no news is good news and from our perspective, such was the case on Monday. Sellers who had fled the market en masse on Friday for fear of the headlines that might come out of Egypt over the weekend seemed to return to the game in a better mood. More accurately, it appeared that some of the shorts decided to run for cover on Monday in response to another batch of decent economic news and the fact that there was no real escalation of the situation in the Middle East.
Frankly, Monday’s bounce higher was to be expected. Without the Middle East going up in flames or the wrong political faction forcibly taking over, those looking to avoid the weekend headline risk probably needed to either reverse their short positions or put some long positions back on. Therefore, the initial sigh-of-relief pop to the upside wasn’t much of a surprise.
Another contributing factor to Friday’s big decline was the implementation of those fancy computer programmed trades. And although the market indices finished higher on Monday, those same programs were seen at work again in the early going. Word is that the fast money types in hedgieland had seen enough of the day-in and day-out moves higher and came into Monday leaning to the dark side. So after the opening batch of green screens, the computers went to work.
Once again the bears got a hand from their friends over at the NASDAQ in the early going as the news that Intel had discovered a problem with one of their chipsets created another program-selling opportunity. Imagine the programs that were triggered when the words “Intel,” “problem,” “shares halted,” and “reduced revenues” hit the tape. Even a beginner program trader probably knew what to do with that setup.
Thus, it wasn’t long before the early rebound was erased and the indices were back in the red. But with the indices at the lows of the days and threatening to break down – an event that would likely have brought in another seller or two – the bulls somehow got it together and staged a rebound. And for a while at least, it looked like the computers had switched sides.
However, from a big-picture perspective, the bulls’ effort was unconvincing at best. While there was a nice run into the close, it did not appear to possess the oomph required to put the market back on its one-way street. And as such we’ll bet that that those same bears that were anxious to fade the open yesterday are still out there waiting for another opportunity.
Thus, the key thing to watch this week will be how the market acts once it returns to those big, round numbers that, up until Friday, were the focal point. In other words, it is one thing for the bulls to produce a bounce from an over-shorted, computer- and headline-driven Friday. But it is another thing entirely to break on through to the other side. It is a safe bet that if the bears are indeed still hanging around looking for an opportunity that they might find it at last week’s lines in the sand.
To be sure, we are not convinced that the situation in Egypt is or will be a driver for the market action. But for now at least, no news appears to be good news.
Turning to this morning… The bulls are attempting to return to form this morning in response to solid PMI reports out of Europe and green numbers from the major foreign markets.
On the Economic front… We don’t have any economic news to review in the U.S. but we will get reports on Construction Spending and the ISM Manufacturing at 10:00 am eastern.
David D. Moenning
Editor: Top Guns Trader
