Volatility Continues for Stock Index Futures!
The dog days of summer have been anything but for S&P futures traders, as concerns about the slumping U.S. housing market and fears of continued tightening credit due to the subprime loan situation have made it a volatile summer for the stock indexes. After a nearly 80-point rally in the September mini-S&P500 futures since recent lows were made on August 6th amidst soothing words on the state of the U.S. economy from Federal Reserve officials, subprime loan fears have come back to the forefront of traders’ minds this morning. BNP Paribas SA, France's largest bank, announced it halted withdrawals from three of its investment funds, as it could not provide a fair value to the holding of the funds due to illiquid conditions in segments of the U.S. credit markets. This sparked selling in European markets, which has spilled over into U.S. stock index futures this morning. Other markets have also reversed recent trends, with Treasury futures starting to recover some of this week’s losses and Japanese Yen futures gaining ground, as traders once again move out of “carry trades.” As we move into the last days of the summer vacation season, fewer traders may be leaving their desks in August as volatile trading conditions show no signs of taking a rest!
Looking at a daily chart for the September e-mini S&P 500 futures, we notice that the recent recovery in prices has still failed to move the market above any of the major moving averages on a closing basis, such as the 20-, 50-, and 100-day averages. This should signal that bears are still in control, with this morning’s sharp sell-off adding to the notion that the three-day rally may have been overdone. The 14-day RSI has turned neutral with a reading of 48.58. A close above the 100-day moving average at 1510.30 would help bulls regain control, but should yesterday’s lows at 1480.50 give way, bears would keep their momentum and set up a possible test of the 1460.00 area.
