What? 2.2% drop in S&P futures from alltime highs in three days?

Well how ’bout we just fix that back in two?  My morning prediction of ending the Christmas Parade of red-green candles came true with two greens taking /ES to new (intraday) highs.  I’m glad I didn’t have CNBC in case they pulled out the party hats again.

But I find it interesting that most of the recovery move in /ES was made yesterday, while today was just a big shakeout, flailing in both directions.  I don’t doubt the highs will be retested, but I think 1560 is starting to harden up as resistance.

And take a look at the /TF – /ES comparison below:

There are two distinct differences that I immediately spot:

  1. That /TF has only partially recovered about halfway from the drop while /ES made sure to make a new record high (“intraday”, as they like to remind us on CNBC).
  2. Each chart closed in opposite directions.  There is obviously some disagreement between Russell and S&P.

What does this mean?  Well, I like to call /ES the “tail” and /TF the “dog”.  I believe there has been some concerted and somewhat successful effort to wag the dog.  In fact, it’s even worse if you add the Dow, which is more like the tip of the tail.  So, while we continue to go vertical to new highs in /ES and /YM, the /TF futures are complaining all the way.  I suspect we’ll revisit those record highs tomorrow, but I’d be more cautious of staying long after that.

Don’t fight the Fed, but it’s also unwise to argue with Russell.

 

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