6-30 monster am rpt

Morning ReportBy Indexconnect

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Copyright © 2010 Drakon Capital, LLC. All rights reserved.

June 30, 2010

1

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RUNNING SCAREDTuesday’s index trade started with 400k ESUs and 4.6k SPUs traded before the 8:30 open. A dark cloud formed in Asia over night and the cloud showed up in Europe and is now in our back yard. Its 10:54 CT and the SPU that closed at 1070.70 got all the way down to 1038.00, down 33 handles. The markets were already weak and going down into the 9:00 release of the Consumer Confidence numbers, we said on the IM that there “was not confidence around here” and in a flash the SPU dropped 5-6 handles just as the number came out, consumer confidence came in at 52.9 vs. the est. at 62.8. In the beginning of the day we did say we could not sell the SPU down 18, 3 minutes into the day but after the 9:00 release we knew things were going to get worse and they did. At the low of the day (1038) we came out saying we knew people would think we were nuts but we were going to get long “right now” and 30 minis later we were trading 1147. But like any good fair tail around here it’s all about taking profits and while we got out of with a 5 handle winner on the first part we missed selling them out at 1048 and puked out when they started to go back down again. After the run up the SPU sold back off down to 1039 and at 11:45 they were back up near 1043-1044. It’s also been a bang up day for volumes, so far there are 11k SPUs and 1.8mil minis traded. Around 1:10 Citibank was halted, down 18% it was a miss print but it shows how vulnerable things are. After meandering around the 1042 -1043 level the SPU broke down to 1036.50 right at the old GLOBEX lows and bounced back up to 1043+ and then just sold off again down to 1037.50. Its 1:48 and no matter what happens and we will not remove it but the markets feel like SHIT and we think we see further down side. Just got back up to 1041 and we are 1038 last, its 2:14 ct. At 2:23 the SPU traded 1033.00 rallied a few handles and made a new low at 1032.80 and bounced up we came out saying any time the make a new low by 2 ticks its not good for the shorts, they rallied above 1036 and than went straight down to 1030.50 at 2:48. Don’t mess with this thing when it’s going down. Its 2:48 and the imbalance just showed Summary: $160,057,910 x $71,700,293, that’s 90 mil to buy and the spoos are popping back up to 1038 at 2:57. On the 3:00 cash close the SPU traded 1037 and then settled at 1035.30, down 35.60 handles on the 3:15 futures close.


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June 30, 2010

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In the end we said the price action was bad and that we thought a break under 1050 would bring us to new lows and it did. The abundance of sell programs was the key to the day, they never let up. As for the days overall trade it feels like triple of Mondays trade. We said it was expected to be a quiet week but as we pointed out in the equity report with all the number out this week “no way would the markets survive” and at least for Tuesday they didn’t.

Wednesday? As the saying goes; you can run but you can’t hide and that’s exactly where the markets are today. While the general public maybe believe that things got better when the stock market went up the rest of us know better. The lack of lending by the banks, a real estate market that refuses to bottom and more debt piling up. The markets know we can’t print money for ever. This morning we will get a look at the ADP number. It’s probably not going to be good. In turn the markets will move lower again but no matter what any one says if it keeps going down and we get a bad unemployment number we will probably rally. Sounds stupid right? Well not really because part of this will have to do with the long weekend but you know what that’s 3 trading days away and for now we have to be concerned with what’s going on today, the last trading day of the 2Q has the DOW down 13 of the last 18 occasions. The NASDAQ on the other hand has been up 12 of the last 17 occasions but down 4 in a row. The first trading day in July (Thursday July 1st) has been up 17 out of the last 20. Its 6:30 am and the SPU is up 7 handles, the EC is up 100 points (down over 90 yesterday) and crude is up .60 cents. Remember, no one promised us a rose garden. In Asia 8 of 11 markets closed lower, they say Asian stocks are having their worst quarter since Lehman fell. In Europe 8 out of 10 markets are trading higher, European shares rallied after the ECB tender results. Our call? We have to wait on the ADP numbers before jumping in. But one thing for sure, don’t think the markets will “just” go straight down. After closing down 37.50 handles yesterday its only natural that the markets are up the question is can they stay up. We still have 980 as our first real down side objective.


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June 30, 2010

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TODAY’S PIVOTS FROM CHICAGOSTOCK

ESU0 September Emini SP500Intraday

Pivot----------1041.25 Range---1038.13-1044.383day

Pivot----------1048.33 Range---1041.67-1055.00

CLQ0 August Crude OilIntraday

Pivot----------75.70 Range---75.65-75.753day

Pivot----------76.80 Range---76.30-77.30

GCQ0 August GoldIntraday

Pivot----------1243.1 Range---1242.4-1243.83day

Pivot----------1244.3 Range---1243.0-1245.7


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June 30, 2010

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About Drakon CapitalDrakon Capital delivers market-driven, real-time trading intelligence to institutional clients in the equity and equity derivatives markets.

Headed by Guy Adami, formerly with Drexel Burnham, Goldman Sachs, and CIBC, Drakon Capital develops client-focused research in portfolio strategy, derivatives, and equities, based on its own proprietary analytical system. Our clients use these market-driven insights and trading ideas to refine their own strategies.

About IndexconnectIndexconnect is a group of veteran of traders and market technicians who have been providing their IM service to their trading customers for more than 15 years. Centralized in the index markets with their desk 10 feet from the S&P 500 futures pit, Indexconnect can provide unique perspective and live quotes from every pit at the CME. They currently provide their services to many of the world's larger hedge funds and prop trading desks.

DisclaimersThis report is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional financial, tax and legal advisors. Nothing in this report is intended to be a recommendation to buy or sell any futures or options contract. Information furnished by others, upon which all of the portions of this report are based, is believed to be reliable at the time of publication but has not been verified and no warranty is given as to the accuracy of such information. Drakon Capital, LLC and its affiliates accept[s] no liability for any loss arising from any action taken or refrained from as a result of information contained in this report or any reports or sources of information referred to herein, or for any consequential, special or similar damage even if advised of the possibility of such damages. Drakon Capital, LLC does not guarantee the accuracy or completeness of the information contained in this report or any analysis based thereon.

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