ES 03-15 (5 Min)  1_28_2015

 

As oil sold off and volatility in the stock market surged in the beginning of 2015, few traders expected all the big ups and downs we have seen so far this year. With three trading days left in January, we expect the wild swings and volatility will persist right into February and beyond.

2015 S&P is a chop shop

There has been some crazy stuff going on in the S&P futures so far this year. The S&P futures (ESH15:CME) have been up and down and all around. In the first 3 trading days of the year the ESH15 fell 58 handles: Jan 2 -6.1, Jan 5 -30.4, Jan 6 -21.5. The next two days the futures rallied 60.3 handles: Jan 7 +25.2, Jan 8 +35.4.

Over the course of the next 4 days it dropped again: Jan 9 -19.7, Jan 12 -12.9, Jan 13 -6.3, Jan 14 -8.6, Jan 15 -18.4, a total of 65.9 handles. The next move was a four-day, 67.3-handle rally, Jan 16 +23.8, Jan 19 CLOSED, Jan 20 +3.9, Jan 21 +9.8, Jan 22 +29.8. And the last 3 trading days have been down, up, down. We have seen some rough starts to January, but this one has really been tough to gauge.

Yesterday’s weakness could be blamed on any number of factors: Europe down, negative earnings reports out of IBM and Caterpillar (NYSE:CAT) and concerns the stronger dollar may slow earnings growth and multinational companies’ sales.

Big day for Apple

Most traders were worried about an Apple upset, but what they got surprised even the most bullish. Yesterday Apple exceeded most of Wall Street’s expectations with profits hitting $18 billion and over 74.5 million iPhones sold. The total equals selling 34,000 phones an hour, 24 hours a day. This pushed profits up 46% from where they were this time last year. Apple also increased the cost of an iPhone by $50 a phone.

Apple’s Tim Cook said “Demand for iPhone was staggering,” and “This volume is hard to comprehend.” Cook went on to say that “We brought on more new people to iPhone than ever before, many of those are switching from Android, and we couldn’t be happier about that.”

Month-end buying

2015 has been the year of shuffling your feet. There has been little opportunity for those who want to just stay short or long. The big ups and downs and the jump in volatility has many traders concerned about the well-being of the stock market, but we think the mutual funds could start marking some stocks up on the final trading days of January and the first few days of February.

In Asia 6 of 11 markets closed higher this morning and at 5 a.m. CT  9 out of 12 European markets were trading lower. Today’s economic calendar starts out with day 2 of the FOMC meeting and announcement, MBA purchase applications, EIA Petroleum Index, 7-year note auction and earnings from Boeing (NYSE: BA), AmerisourceBergen (NYSE: ABC), EMC (NYSE: EMC), General Dynamics (NYSE: GD), and Facebook (NASDAQ: FB).

S&P up 5 of the last 7

Our View: Like the markets, my account has been up a day, down a day. I try my best to be patient but even when I do nail it I don’t hold on long enough. I am not afraid to pull the trigger I just can’t seem hold them when they are going my way. It is my main nemesis.

After a rocky day of trade Apple reported better numbers, and this (believe it or not) pushed the ESH15 all the way back up to 2046.50 and then back down to 2028.50. Those are some very big moves, but at 5:00 this morning only 125,000 ESH had traded. I imagine those numbers will pick up at we go into today’s 8:30 open but that’s not a lot of volume after such a big move up and back down.

Like I said a few weeks ago, the 12- and 18-handle ranges we were accustomed to in 2014 have moved out to 20-40 on a daily basis. Our view is exactly what the title of today’s Opening Print says: Embrace the chop.

Keep an eye on the Globex highs and lows – selling the early rallies and buying weakness. We think the mutual funds still have cash to do more buying going into the end of the month and the first few days of February. You can take it from there…
“S&P Dumps and VIX Jumps”

As always, please use protective buy and sell stops when trading futures and options.

  • In Asia 6 of 11 markets closed higher: Shanghai Comp. -1.41%, Hang Seng +0.22%, Nikkei +0.15%
  • Earlier in Europe 9 of 12 markets are trading lower: DAX -0.41%, FTSE -0.36%, MICEX -0.09%, GD.AT -6.78% at 5:00 am CT
  • Fair value: S&P -6.36, Nasdaq -7.42, Dow -71.42
  • Total volume: 1.9mil ESH and 6.7k SPH traded
  • Economic schedule: Day 2 of the FOMC meeting and announcement, MBA purchase applications, EIA petroleum index, 7-year note auction and earnings from Boeing (NYSE: BA), AmerisourceBergen (NYSE: ABC), EMC (NYSE: EMC), General Dynamics (NYSE: GD), and Facebook (NASDAQ: FB).

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