Trading ended in the stock index futures on Friday with the three major indices getting hit hard by selling pressure. Lower demand for higher risk assets was the theme today as traders took profits and failed to buy on the dips. The recent sharp rise in the equity markets has led many traders to feel that current prices are overextended given the state of the economy.
Technically, all three major indices posted daily reversals down on October 21 which is usually a sign that the selling is greater than the buying at current levels. In addition, the December E-mini S&P 500 posted a weekly reversal top while the December E-mini NASDAQ and December E-mini Dow manage to eke out small gains. This divergence among the indices could be an indication that money is leaving the large cap stocks.
Treasury futures finished lower as long traders sold off positions ahead of next week’s auction. There seemed to be no buyers on weakness either for the same reason. Stories are circulating that the Fed may exit from its current loose monetary policy sooner than expected. The December Treasury Bonds and Treasury Notes seem to be indicating that investors will be looking for higher yields during next week’s auction.