After Tuesday’s session the S&P 500 futures tumbled back below 1900. On Wednesday we saw an overnight rally, leading the ESH16 back above 1900 to 1910.75, up 14 handles on the session until the cash open when the bottom fell out of the equity indices. While crude oil futures did take a fall, briefly trading under $30.00, the focus was on the benchmark S&P. The ES dropped 43 handles in just over an hour and then proceeded to rebound, trading back near the overnight high before settling the day at 1908.00, 4.25 handles off the late-day highs, but up 11.25 points on the session.
The crude oil rally was equally impressive as the CLH16, which had briefly traded below the $30.00 area, made its way up to $32.75 just before the globex close, up $3.00, or 10%, from the earlier lows. Both oil and the S&P seem to be attempting to build a higher low action on the daily chart with the sharp reversals that came in this morning’s session.
Yesterday was a good example of how fear and panic have continued to play a significant role in the markets over recent weeks. We highlighted the inflows into the S&P 500 during last week’s end of month rebalance, and then additional inflows in the large market-on-close buy orders that have accumulated since that time frame. Obviously, while there has been some short covering, there has also been some influx of new money. Once that buying took place though, the ESH failed below the 1950 area, and as it dipped below 1900, no one wanted to be left holding longs, as another push lower could have led the markets into “bear market” territory. At the end of the day, what we saw was the sellers flushing the market lower, and after forcing out those weak longs, left an opportunity for buyers. The question going forward is, will this near-term higher low hold?
Overnight, the calendar featured statements from the ECB’s Mario Draghi as well as a monetary policy statement from the Bank of England, followed by U.S. jobless claims and factory orders. Also, today will continue to feature the peak of earnings season as many of the S&P 500 benchmarks have been reporting this week. The tendency over the last 18 months has been for a quiet session higher the day prior to the non-farm payroll release, with the NFP Friday closing lower.
In Asia, 9 out of 11 markets closed higher (Shanghai Comp +1.53%), and in Europe 9 out of 12 markets are trading higher (DAX +0.29%). Today’s economic calendar includes the Weekly Bill Settlement, 52-Week Bill Settlement, Chain Store Sales, Eric Rosengren Speaks, Challenger Job-Cut Report, Jobless Claims, Productivity and Costs, Gallup Good Jobs Rate, Rob Kaplan Speaks, Bloomberg Consumer Comfort Index, Factory Orders, EIA Natural Gas Report, 3-Month Bill Announcement, 6-Month Bill Announcement, Fed Balance Sheet, Money Supply, Loretta Mester Speaks, and earnings from Brinks Co (BCO), Charter Communications Inc (CHTR), CIGNA Corp (CI), Clorox Co (CLX), ConocoPhillips (COP), Cummins Inc (CMI), Intercontinental Exchange Inc (ICE), Linkedin Corp (LNKD), McGraw Hill Financial Inc (MHFI), Netgear Inc. (NTGR), New York Times Co (NYT), Occidental Petroleum Corp (OXY), Philip Morris International Inc (PM), and Ralph Lauren Corp (RL).
ES False Starts
Our View: After the big sell off on August 24, and the big sell off that ensued in January, it’s no wonder people are concerned. The fed is in a quandary, Asia and Europe have a very unstable feel to them, and everytime oil drops the ES goes tumbling down. But, somehow, someway, the future’s always come roaring back. I have to admit that when the ESH16:CME was falling yesterday it felt like it could keep going. I keep talking about how there are three parts to the trading day now; what the futures do in Globex, what the futures do in the first part of the day session, and what they do in the second part of the day session. It is clear to see that if the big investment / mutual funds have cash to buy, the S&P always goes flying back up, and yesterday was a perfect example of how it works.
This morning we have another heavy round of economic and earnings reports. The ESH15 overnight globex range is 1922.25 to 1895.00. Our view, sell the early rallies and buy weakness.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 9 out of 11 markets closed higher: Shanghai Comp +1.53%, Hang Seng +1.01%, Nikkei -0.85%
- In Europe 9 of 12 markets are trading higher: CAC +0.10%, DAX +0.29%, FTSE +1.13% at 6:30am CT
- Fair Value: S&P -6.06, NASDAQ -5.65, Dow -80.72
- Total Volume: 2.84mil ESH and 7.2k SPH
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