As we move to the end of another trading month a feature now building in US equity markets is the apparent disconnect between the three principal indices, and in particular the divergence between the NQ, which appears to be moving South, and the others which are moving North.
As we move towards the end of the first quarter of the new year, it is interesting to consider one of the more subtle changes to the principle US indices that appears to have passed by unnoticed,
For US equity markets, and the YM emini in particular, it is the daily chart which has focused the mind over the last few weeks, and the prospect of whether or not the sustained resistance level that has developed in the 17,850 region would be breached, or whether this would ultimately cap the Santa Claus rally and bring it to a shuddering halt.
The traditional and seasonal Santa Claus rally appears to have come rather early this year, with October’s rally for the NQ Emini (QQQ, quote) recording a sensational month of gains following the equally dramatic events towards the end of August which saw the index correct sharply, before strong stopping volume duly appeared to prevent the market falling further.
U.S. Q3 Advance GDP Price Index q/q down to 1.2% vs 1.5% growth expected and Advance GDP q/q 1.5% to expectations of 1.6%.
It was another day of solid gains for equity markets yesterday, with the NQ E-mini leading the way higher, and closing with a wide spread up candle ending the session at 4094, just shy of the psychological 4100 price level which was missed by o.25 of a point!
It’s been a period of pause and reflection for equity markets, following the picture perfect price action of August, as the up elevator finally reached the next level, rolling gently over into the current phase of price congestion.
Price action on the major US indices yesterday could best be described in one word, indecision, with all of the Emini futures closing with a doji candle of one variant or another.
Yesterday the YM E-mini index future delivered a masterclass in trading what you see, and not what you think. Trading with an opinion is one of the most destructive approaches to the market – just ask the euro bears who have been shorting the single currency for years. All to no avail.
Whilst the ongoing conflicts in both the Ukraine and Iraq are beginning to impact world markets, yesterday’s price action was less severe than expected. In other words, the price action was more of a pause than a major sell off.
