S&P 500 Futures: Turn Around Tuesday Says Hello
After a 36 handle rally on “mutual fund Monday,” the S&P 500 Futures dumped as much as 40 handles on “Turnaround Tuesday.” The ES traded down to 2112.25 before rallying into the close to settle at 2122.25. Volume has really picked up with 3.7 million ESZ and 1.2 million ESU contracts traded. After bulls had put in a nice response to Friday’s selling, the bears did what they had to do yesterday, slapping price right back down in the face of Monday’s buyers.
At the end of the day the Nasdaq futures fared far better. Losses were limited to just 1%, closing down 39.25 handles at 4724. Smalls caps suffered the worst of the day’s losses, closing below friday’s low, down 2% on the day. The CBOE’s volatility index (VIX) traded as high as 18.97 before settling at $17.85, or 17.5%. Crude oil futures traded lower again closing at $44.90, down $1.29, or 2.90%. The 30 year bond futures again dropped 1.20% down to 165’09, while the U.S. dollar rallied, and gold futures closed little changed.
What Next?
There is still the September quad witch to get past this week, and then the two day Fed meeting next week. After that the elections will take more of the forefront. While most institutions are not expecting the Fed to hike next week, yesterday BNP Paribas put out a note stating that they hold firm to their call for a September rate hike. With all of this, and the September seasonality, we are anticipating a new low below the 2100 price in cash hours.
Download all of the September Quad Witch Expiration stats here
How Much Lower Will It Go?
Is this the start of another 10% correction? We are not going that far, even though with two 10% drops in six months, and then the 8% drop in June, make it seem more of a routine. Every time the S&P has hit new highs the top callers have come out calling for a correction, and after many months they get a 2% dip and scream validation. MrTopStep believes that price is going to have to open the doors of clues for us. This bull market that began in 2009 cannot be called quits just yet. Every pullback has been a buying opportunity. Even last year when the S&P looked weak in August and September, it lead to the best performing month in history last October.
Until price finds further erosion we may look at the “what ifs,” but these markets are very bipolar and can slow down to record levels and then become volatile very quickly. A 5% pullback seems at least reasonable down to a test of the 2050 level. Once that level is tested we can evaluate the personality of this market and make a determination from there. In the meantime, bears must secure a series of lower highs and lower lows. Those are the indicators MrTopStep is looking for.
Overnight Price Action
Overnight equity markets in Asia traded modestly weaker while European markets maintained a modest bid. The S&P 500 futures have traded quiet making a high of 2129.75 early in the Tokyo session before coming back down to 2121.25 early in the European session. They made a retest of the high, and after being resisted there, is currently trading at 2124.00, up 1.75 handles with volume of 205K at 5:15 am cst.
Heading into today’s cash open momentum still favors the bears. There are some indications that this market may continue the up a day down a day trend going into expiration and then settle on a new range next week. Bulls need a rally comparable to Monday’s that will push the ESZ into a new weekly high. Meanwhile, bears need at least a close near the 2100 low. Today’s calendar is light, and with the slowdown of globex volume, it’s difficult to have a convicted view this morning.
In Asia, 8 out of 11 markets closed lower (Shanghai Comp -0.68%), and in Europe 9 out of 11 markets are trading higher this morning (DAX +0.45%). Today’s economic calendar includes Bank Reserve Settlement, MBA Mortgage Applications, Import and Export Prices, and the EIA Petroleum Status Report.
Our View: Today’s expiration stats show the S&P 500 up 18/down 14 on the last 32 years. We could see another rally today, but that failure of Europe to take the ESZ higher is concerning, and leaves it vulnerable. With the lower volume today, and lighter calendar, I think it’s likely we see an inside day. The price action from Friday will continue to take time to play out through the expiration. At this point, every close this week has been above Friday’s low. Our call remains to sell the early rallies and buy later weakness, but if the spoos begin to breakdown again, sell stops will target 2080.
‘S&P 500 and Troubled Waters’
‘MrTopStep BootCamp’
I delayed the MrTopStep BootCamp for one week because with the markets moving so much we wanted to extend the offer. That said, this bootcamp is going to offer new talent on the trading and technology side. Dave Wienke from POINT.786 is on the schedule a few times to go over his technical service and how it can help your trading. Also, Anthony Stavros from CQG will be demonstrating the platform and going over the newest product releases. It’s an exciting time at MrTopStep, and with volatility picking up, the September quad witch, and the end of the 3rd quarter just around the corner, there could be no better time to sign up. Below is the full week schedule of the boot camp. I hope to see you in there next Monday.
Thanks,
Danny ‘DBOY’ Riley
As always, please use protective buy and sell stops when trading futures and options.
MrTopStep September Bootcamp is right around the corner. Sign up here to reserve your spot.
- In Asia 8 out of 11 markets closed lower: Shanghai Comp 0.68%, Hang Seng -0.11%, Nikkei -0.69%
- In Europe 9 out of 11 markets are trading higher: CAC +0.09%, DAX +0.45%, FTSE +0.70% at 6:00am ET
- Fair Value (Dec): S&P -7.42, NASDAQ -5.75, Dow -87.03
- Total Volume: 1.2mil ESU and 21k ESU and 3.7mil ESZ and 17k SPZ traded
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