The SPX employed a tactic more often used by the NDX in which the strong open, up 4.52-points, took it to 2605.94 which was above R2 before the futures even opened.
This is the equivalent of limit up or down in commodities of course, and just to make sure the low was 2605.44.
However, it was hardly a surprise as we mentioned that it would be wise to look at R3 and as it had just moved from 2625 to 2630 a closing price between the two is about right.
The ratios are weakened above the zone and stronger below it, witness the two DR levels, but R3 is getting very punchy even for the mighty Dec expiry.
Range: 2605 to 2630 or 2630 to 2645
Type: On balance bearish
A static NZ for a change in the NDX but today could be the defining day for this index.
The reason why we suspect this is we pointed out how important Y2 at 6400 was and this index got as low as 6385.32 yesterday which was actually down about 20-points.
It has got to be hard to go the other way when the other two indices are charging ahead to a 1% daily gain, so we applaud them for trying but also the fact that Y2 has held firm, and both of these factors are what raises our suspicions.
The ratios below the zone may look weaker but are actually stronger again, the addition of R1 may just give a false impression.
Range: 6325 to 6400 or 6400 to 6550
As we said yesterday in the DJX “it looks like it is setting itself up to employ a different tactic, one that will in all probability involve an opening gap” which it did indeed.
This was 45-points which took it to 23625 and more importantly they followed this through as the low was 23617.
OK so the tax plan was back on the table which was what started this bubble back at the start of the year, but this was strike 5 and it is Dec, so R32 is not that extreme, although we would have expected this last week really, but this doesn’t necessarily mean this index has gone bananas again.
However, it doesn’t rule it out either, so today will be very informative as it should now act as it is in a ratio level it is uncomfortable with.
Range: 23600 to 24100