Pure Resistance
The S&P 500 futures resisted above 2140 for the seventh time since the October low of 2107.75 was made. Yesterday’s globex high was made at 2143.75 about an hour before the cash markets opened. When the 8:30 am cst bell rang, the equity markets were hit with heavy sell programs, taking the benchmark index futures down from the 2142.00 open to 2126.75 in the first hour. From there the futures bounced making, a midday high of 2136.50, before reloading the sell programs into the close pushing the index to a new low at 2122.50. The ES settled at 2124.00, down 9.75 handles from the prior close, and a tick shy of 20 handles from the globex high.
In yesterday’s Opening Print I said that the battle was for bulls to recapture 2150 and bears to take 2125. When the markets showed a weak hand early in the session I put this out in our social trading chat room…
IMPRO: Dboy:(9:48:11 AM):looks like another rejection at or above 2140, if it doesn’t bid back up early I think 2125 could be in the cards by weeks end, maybe days end.
It was clear throughout the day who held the tape. Price action remained in the lower half of the day’s range all day. I tried to buy early and scratched the trade. When no buy programs showed up all day, we knew it could get nasty going into the close. I reminded the room that the PitBull has always said that “markets tend to close like they open,” which was not a good sign for bulls.
Bounce?
Is the ‘spooky’ month of October saving the best for last? We have mentioned how disappointing this month (October) has been in the past… The monthly low is at 2107.75 and it certainly becomes a legit target going into Monday’s month close. While bears did make a splash yesterday, and the S&P looks weak, I cannot rule out a bounce. I have been saying for weeks that “if it looks weak, then buy em.”
Let’s face it, bears have been here before. They pushed the futures to the lower part of the range without actually taking charge and expanding it. There was no building on momentum, and the buyers come in and pushed it up. Sure, one of these times will be different, but this market has been stuck above 2100 since the post Brexit bounce, and bears are going to have to show up or go home.
The equity markets are about to enter their best six months of performance. Up to this point the elections have not really scared these markets. The potential ramifications of the Brexit have not taken away this markets firm hold of 2100, and even what seems to be the likely December rate hake has not punctured a hole in the wall, or at least a noticeable one. Bears have to own 2100 or they give it all back up.
While You Were Sleeping
Overnight stock markets in Asia and Europe were mixed to lower. The S&P’s made a weak 2129.50 high in globex. They failed to hold the open, and pushed down to 2116.25 shortly after the European open, leaving the month’s low of 2107.75 as the next key technical target. After making that low, the markets have now pushed higher up to 2128.50, a 12.25 handle bounce. Currently, the ES is trading just two ticks off that high, up 4.5 handles on the session, with close to 180k contracts traded.
In Asia, 6 out of 11 markets closed lower (Nikkei +0.63%), and in Europe 6 out of 11 markets are trading lower this morning (DAX -0.20%). Today’s economic reports include GDP, Employment Cost Index, Consumer Sentiment, and the Baker-Hughes Rig Count.
Our View: There has already been a noticeable dip and 10+ handle RIP this morning. Volume is looking good, over 250K pre open again, with GDP and Consumer Sentiment hitting the tape later on. Stats show that Friday’s are the most difficult days to counter trade the intraday trend, so if the S&P starts lower and does not bottom in the first hour, then we are looking at 2107.75. However, if the S&P does what it has so many times before, now that people are turning bearish, it has the legs to pump right back up toward 2140, if there are enough buy stops. Our call is to sell the early rally.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets closed lower: Shanghai Comp -0.26%, Hang Seng -0.77%, Nikkei +0.63%
- In Europe 6 out of 11 markets are trading lower: CAC +0.32%, DAX -0.20%, FTSE +0.21% at 6:00am ET
- Fair Value: S&P -5.69, NASDAQ -7.28, Dow -83.21
- Total Volume: 1.8m ESZ and 3.5k SPZ traded
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