SPY June 6 2013

SPY June 6 2013

A textbook day for day traders. Everybody was waiting for and watching the 1600 level on the S&P E-mini futures. When it appeared early on that the market might ignore that and simply move higher, abruptly the futures reversed and went screaming down to take out that level and overshoot by a point and a half.

That was the decisive point since the move down from 1685 began. As we tweeted this afternoon, the quick reversal was vital, and we got it. Once momentum built, everybody who was caught short - the usual crowd that always anticipates Armageddon - had to cover either right away or higher later. Pay me now, or pay me later. The result was that we saw a classic short-covering squeeze that sent the futures to the low 1620s.

Looking forward, the employment report tomorrow will freeze things as the night goes on. However, it should not change the tone of the market, which is in bounce mode. After our Bearish interlude, we resume our Bullish stance and anticipate new highs at some point this summer because the excess has been wrung out of the market and the same factors that brought us to this point remain in play. Continuation of this bounce is likely, though periods of consolidation along the way are almost inevitable. The Nikkei remains a problem, and in point of fact, the mid-day weakness was caused by the Yen's inexplicable leap higher against the Dollar.

To the downside, a break below 1612 would be damaging and show not enough excess was take care oft today. One troubling factor was how easy it all was. There didn't seem to be many stops right below 1600, and the reversal was awfully quick, almost perfunctory. We still have to look over our shoulders for a while, but our target was hit, and now it is time to look ahead.