End of the correction or a retracement of Friday’s range?????
After a bleak opening last night or almost ¾% lower, the SP EMINI did an about-face and finished the day almost 1% higher. Today was a different day, traders ignored the potential risks in Egypt; tomorrow it could be a different attitude but the bottom line is the uncertainty is keeping traders on their toes and guessing. The positive attitude today took the “flight to quality” assets lower like the Gold, US Dollar and the 30yr.bond. However, crude acted like it was on steroids posting a 3% move today. On the economic front today, the Chicago PMI said that the business activity in the region rose to 68.8 in January from 66.8 in December. Remember a reading over 50 indicates expansive business activity.
So how do we take advantage of the market tomorrow??
Like I pointed out Friday, we should expect or couldn’t rule out a run to the 1285-1287 area. Given today’s actions lets bump this level up to the 1289/1290 area. In fact, tonight or in the first couple of hour of trading tomorrow I would look to SELL the SP EMINI@ the 1289.00/1290.00 level which is one of our Weekly Trading Zones (WTZ). Watch your CFRN indicators for further confirmation. How do I get the CFRN indicators? at www.cfrn.net. On the long side let’s see a few more zigzags before we make a commitment to it. Right now I envision the 1270/1268 area as support in the SP EMINI. Looking at a broader picture or daily chart, last nights low turned out to be the uptrend line so if the bulls emerge they will have to defend last nights low or 1262.00. Breaking that level would dampen the bulls’ spirits and open the door for the 1250/1248 level or a .382% retracement level.
Stay Alert Stay Alive
Burton R. Schlichter
Senior Market Strategist