The S&P has been on a terror to the upside with little or no pull backs. As the futures enter the earnings season and this week’s July options expiration there has been a big shift in bullish sentiment. While MrTopStep think there is more upside potential in the S&P 500 futures, we also do not think the S&P can keep going up as it has without a 20 or 30 handle pull back. With the futures trading at the 2150 area, most traders we speak to think the ES could pull back going into the end of the week, while others are calling for 2200.00 and beyond.
The S&P 500 futures continued its ascent yesterday trading all the way up to 2149.25. Global quantitative easing and zero borrowing cost continue to grease the S&P and the global stock markets higher. Whats going to stop the S&P from trading up to 2175 or 2200.00? Not Brexit, that’s for sure, and it’s not this weeks July options expiration we are worried about either, it’s next week when Donald Trump shows up in Cleveland for the 2016 Republican Convention.
The US stock markets are on a roll and right now and there does not seem to much that can stop the up move, but, and there is always ‘but’… While not a lot of people are talking about it Hillary Clinton is just 3 percentage points ahead of Republican candidate Donald Trump in some of the latest polls. There has never been a presidential election like the one we are seeing now. We all know the Democrats and Republicans have different agendas, but there has never been such a stark difference between the two candidates. The upcoming GOP convention in Cleveland next week is bound to stir things up, and we expect some type of jump in volatility when ‘The Donald’ takes center stage.
‘Crooked Hillary’ or ‘Crazy Donald’?
I am sure most traders are not even thinking about it, but it’s alway been my job to have a forward looking view, and the GOP convention is becoming front and center. Will it be a market turning event? I do not know that for sure, but with so much indecisiveness and uncertainty, the S&P may not like what he has to say. Trump has already stated he wants to change almost every trade deal the U.S. has, and has also said he would kill ObamaCare. He has attacked people of all ethnicities yet he has gained a lot of attention for his constant heckling of the status quo. This morning the New York Times did a story titled ‘For Whites Sensing Decline, Donald Trump Unleashes Words of Resistance.’ Below is the first paragraph of the story and the link to the full story.
“The chant erupts in a college auditorium in Washington, as admirers of a conservative internet personality shout down a black protester. It echoes around the gym of a central Iowa high school, as white students taunt the Hispanic fans and players of a rival team. It is hollered by a lone motorcyclist, as he tears out of a Kansas gas station after an argument with a Hispanic man and his Muslim friend.”
View the entire New York Times article here.
Almost 8 years ago I wrote a story that Barack Obama would become the 44th president of the United States and that he would win by a landslide. He did, and I remember being in Chicago watching many people celebrate, particularly minorities, crying and praising god that he had been elected. I was glad of the idea that this nation had elected our first minority President, but in the end, I do not think he delivered. That said, I understand politics and trading don’t mix, so that is why I am not going to tell you who I am going to vote for. I am here to say that there could be another ‘upset’ for the status quo. Like it or not, the people of the U.S. are looking for change again, and that could mean the nomination for the President of the United States going to Donald Trump.
Will the markets react in kind?
After being on the trading floor for nearly 40 years I have always said that I think I have seen just about everything. I have been to the top of the mountain and the bottom of the mountain, and I now stand somewhere in the middle. Will the people elect ‘Crooked Hillary,’ or will they go for ‘Crazy’ Donald Trump, who can’t, or is unwilling, to change his shocking ways? As the head of MrTopStep.com I have always done my best to stay out of the way of politics, but with Trump’s continued tirades its really hard to do that. It’s not like anything the American public, or the world for that matter, has ever seen.
That said, things are going to go into full gear with the U.S. Presidential election next week when Donald Trump takes center stage in Cleveland. Will the markets react in kind? I really do not know, but what I do know is, they will react in kind if he get’s elected. There is a lot of time between now and the November election, and it’s my guess that with the S&P up so much going into the end of the summer and beginning of fall, when the election kicks into full gear there will be a major uptick in volatility.
In Asia, 10 out of 11 markets closed higher (Nikkei +0.84%), and In Europe 8 out of 12 markets are trading higher this morning (DAX +0.26%). Today’s economic calendar includes MBA Mortgage Applications, Import and Export Prices, Robert Kaplan Speaks, Atlanta Fed Business Inflation Expectations, EIA Petroleum Status Report, 30-Yr Bond Auction, Beige Book, Treasury Budget, and Patrick Harker Speaks.
How High is High?
Our View: The ES sold off a little on the close and took out yesterdays 2149.25 high by two ticks to 2149.75. We have a few economic numbers and Fed speak to get past, but this morning is looking like a lot of the last 10. If current patterns hold you have two choices; sell the early rallies and buy weakness, or just wait for a good pull back and ‘buyem.’
Download all of the July expiration stats here.
As always, please use protective buy and sell stops when trading futures and options.
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- In Asia 10 out of 11 markets closed higher: Shanghai Comp +0.37%, Hang Seng +0.46%, Nikkei +0.84%
- In Europe 8 out of 12 markets are trading higher: CAC +0.46%, DAX +0.26%, FTSE +0.15% at 6:30am ET
- Fair Value: S&P -6.67, NASDAQ -7.27, Dow -89.20
- Total Volume: 1.7m ESU and 7.1k SPU traded
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