CNBC and Bloomberg will have a different view of what happened to the S&P 500 futures (ESH17:CME) yesterday. I am sure the ‘talking heads’ will say the stock market was overbought and bla bla bla. In reality the 37 handle rally in the S&P up to the ‘big figure’ at ES 2400.00 ran every stop and short out of the book.
Over the last several weeks I honestly believe the news headline algos have played a key part in helping not only to push, but to keep the rally going. The abundance of better than expected economic reports, and President Trumps initiatives, continue to pump optimism into the stock market.
What happened yesterday was that the stock markets got tired and saw some institutional selling or profit taking. One of the best ways to figure that out is by keeping track of the half hours. For instance, if you look exactly at yesterday’s 8:30 ct futures open the ES sold off a few points right away, after that there were several sell programs that were done, 9:00, 9:30, 10:00, 10:30 11:00.
It’s 10:45 ct and the (ESH17:CME) just traded down to a new low at 2382.50 and the Money Maker chart is showing 4 buys for a total of 5,400 ESH’s bought. To this point every rally has failed, but the big question is ‘do the guys with the better seats show up’ and blow up the sell off? This is what I just put out in the forum:
IMPRO:Dboy:(11:57:31 AM) : What has been happening when on the days the ES does sell off 10 or 20 handles?
And I got this back on Twitter:
G-Know @FibonacciSQNC – If u stick with the recent trends, market will snap back into close. Overstaying ur welcome on Shorting $ES is dangerous.
After finding the 2382.50 low on the 10:30 cst Euro close, the S&P 500 futures traded sideways into the final hour, making a midday high of 2388.00, a 5.50 handle bounce. From there, the ES showed weakness going into the close and pushed down to a new low at 2378.00 in the final minutes, a 23 handle drop from Wednesday’s high. The futures settled the day at 2381.75, a tick below the morning low, and down 11.25 handles, on the biggest down day since January 30th.
At the end of the day there was no sustainable bounce, but as the S&P 500 futures were making the 2401 high earlier in the week, the VIX futures were moving higher. It seems like some concern is coming into this market that has seen a historic rally. We have been asking “how high is too high?” Now the question becomes “how much of a retracement is enough?” Can we start buying 20 handle dips, or 35 handles at the top of the prior range? The bears put together their best day in over a month, but just after the bulls had pushed to what seemed to be unforeseen levels, and it seems like just a breather at this point. If the bears want to accomplish something they can create the first 1% losing day in almost 100 days, until then, it all seems to be noise.
While You Were Sleeping
Overnight, all Asian markets were lower, followed by a weaker Europe, with only two markets barely higher. The S&P 500 futures failed to grab a bid and dropped below Thursday’s low, pressing down to 2373.75, just after midnight, and has since held a bid back up to 2380.00. The last print in the futures is at 2379.25, down 2.75 handles at 5:50 am cst, with volume at 152k.
In Asia, 11 out of 11 markets closed lower (Nikkei -0.49%), and in Europe 9 out of 11 markets are trading lower this morning (DAX -0.12%). Today’s economic calendar includes PMI Services Index, ISM Non-Mfg Index, Baker-Hughes Rig Count, Fed’s Janet Yellen, Charles Evans, Jeffrey Lacker, Jerome Powell, and Stanley Fischer all speak.
Barclays Fed Speaker Preview
Chicago Fed President Evans (FOMC voter) and Richmond Fed President Lacker (FOMC non-voter) speak: The two presidents have nearly opposite views on monetary policy, with Evans falling on the dovish end of the spectrum and Lacker on the hawkish end.
Fed Vice Chairman Fischer (FOMC voter) speaks: Fischer will discuss the framework for monetary policy. We expect his speech to focus on the communications aspects of monetary policy rather than its near-term direction. He will likely discuss the value of the new uncertainty charts (fan charts) the FOMC will include in the next SEP. He will also discuss the value of providing FOMC forecasts more generally.
Fed Chair Yellen (FOMC voter) speaks: Yellen’s speech is the last scheduled appearance by an FOMC member before the March meeting blackout period begins. The timing of the speech is not coincidental and these remarks are the FOMC’s last opportunity to signal for a March rate hike. We do not believe that the FOMC is signaling a March rate hike and instead we have interpreted their “fairly soon” language as pointing to a rate hike in May or June. Although the Chair will discuss the risks of waiting too long to tighten policy further, we do not believe she is quite ready to hike rates in March, given the overhang of policy uncertainty.
Our View
The S&P’s traded down to 2373.75 this morning, just 3.25 handles above the high made on Monday, and have now retraced 28.25 handles from the all time high. We expect for there to be some support at the top of the prior range that will lead to a push back up to 2390 and 2400, but there may be some back and fill first.
Let’s face it, bulls have controlled this party and nothing is showing that it’s over yet. The bears have not put together back to back down days (of any substance) since late January when the last big level 2300 was missed by two ticks, and then the futures traded back to the prior support. Until that support breaks we have to go with the trend and assume more of the same. Our view remains the same, you can sell the late morning rally and buy late day weakness, or just stick with the trend and buy the weakness.
Market Vitals for Friday 03-03-2017
[gview file=”https://mrtopstep.com/wp-content/uploads/2017/03/Market-Vitals-17.03.03.pdf”]
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 11 out of 11 markets closed lower: Shanghai Comp -0.36%, Hang Seng -0.74%, Nikkei -0.49%
- In Europe 9 out of 11 markets are trading lower: CAC +0.51% DAX -0.12%, FTSE -0.14% at 6:00am ET
- Fair Value: S&P -0.72, NASDAQ +1.31, Dow -12.45
- Total Volume: 1.75 m ESH and 4.0 k SPH traded
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