On Monday, index futures enjoyed a day of rest from the continual upward stagger on the charts. Instead of the usual early dips and staccato price jerks higher, the markets sold off in short-term corrective mode. Downward price movement is usually more methodical than upward, and yesterday was no exception.

On Monday, S&P 500 futures bobbed their way lower. After opening on the daily pivot point, a lift into the R1 value was quickly rejected. Back to the pivot, down to S1, up to the pivot resistance one more time before the afternoon drop to its R2 value finale.

All this inside an 11.75pt total range, a rather pedestrian span but better than what S&P traders endured last week.

Russell 2000 futures coasted thru a smoother ride... mostly downward all day. Once the selling began, there were no measurable lifts upward again. Short signals near the pivot worked for solid to large profit potential, and subsequent sell signals near 792 also offer a second shot at substantial gains if taken.

S&P 500 futures closed modestly lower, no big deal in the general context of this daily chart. Just another pullback session inside the latest ramp from late November upwards.

Russell 2000 futures by relative comparison erased the previous thirteen sessions' worth of upside progress. Yesterday marked the lowest close for this index since 11/28. This continues to demonstrate how the Dow and S&P are only two major indexes holding higher on artificial props. Technology, transports, mid-caps, small caps, semis... all the rest are lagging in feeble fashion.

Summation

Some of yesterday's behavior could be a hangover from option expiry, i.e. assigned stocks on expired option contracts from Friday being liquidated yesterday. However, the overall pattern for months now has been big caps leading, everything else lagging. The last two weeks in December are traditionally tough for short-term trading. Sideways congestion interrupted by sudden surge moves up or down. That is likely to continue or accentuate this year as we head into year-end, with indexes propped upward interspersed with bouts of selling like yesterday.

No real fundamental changes visible in sight... sideways to upward unless some unknown catalyst emerges to derail the year-end ascent. Tuesday morning is likely to see a continuation of the previous afternoon trend, but that may not last thru the closing bell. Long side has the overall bias, but intraday traders are nimble enough to prosper from short term trends going either way.

Trade To Win
Austin P
www.CoiledMarkets.com

Austin Passamonte is a full-time professional trader who specializes in E-mini stock index futures, equity options and commodity markets. Mr. Passamonte's trading approach uses proprietary chart patterns found on an intraday basis. Austin trades privately in the Finger Lakes region of New York.