Yesterday, after an 8.75 handle Globex range which saw a push up to 2475.00, the S&P 500 futures (ESU17:CME) printed 2473.75 on the 8:30 am cst cash open, up 2.75 handles. After the bell, the ES made another push back to the overnight high at 2475.00, before selling off down to 2465.25 just after 9:30am CT, a single handle below the Globex low, and a tick shy of a 10 handle rule.
From there, the S&P’s chopped higher, eventually making an afternoon high of 2472.25 late in the session, and on the cash close sold off down to a 2465.00 afternoon low, before settling the day at 2470.00, down a handle, on decent volume of 1.2 million minis.
July’s Uneventful Departure
The month of July came and went. As the second half of 2017 opened, it looked much like the first half, that being a quiet, low volume push up to new all time highs. Last weeks selling from the 2480.50 all time high down to 2457.00 looks like it was just noise, perhaps due to the research note by JPM’s Marko Kolanovic, or possibly some month end profit taking. Either way, the benchmark futures traded 3.25 handles from all time highs this morning, and the coast seems to be clear for now.
The VIX, which was down to $8.84 last Wednesday, spiked up to $11.50 on Thursday, and went down to $10.06 this morning. Since May 19th, the VIX only closed above the $12.00 mark one time. At this point, the biggest sell off on the year came back in May, and spread across three sessions, and only five times this year has the S&P 500 futures closed lower three days in a row. Its biggest losing streak was five consecutive red days back in March, which totaled a 29 handle drop.
As the equity indexes enter into August, the question is, what’s next? We would all like to know… The PitBull often talks of trend changes at the end of July and early August, and two years ago we did see some weakness in August, but last year the markets stayed the quiet upward course. For now it looks like 2400 offers good support for the S&P’s, and as long as that holds, then buying the dips will work best.
During the heat of summer, traders tend to get a little more exhausted and bored by the price action, and I think we start looking toward the weak seasonality post Labor Day trend. Many traders will start to call tops, but MrTopStep says that this party has lasted longer than most of us ever dreamed, and as long as the champagne is still being poured, we are going to drink and look to buy the dip.
While You Were Sleeping
Overnight, equity markets in Asia were very positive, led by the ASX 200 Index, which closed higher by +0.91%. Stocks are also trading positive in Europe this morning, with all but 1 major market trading higher.
In the U.S., the S&P 500 futures opened last night’s globex session at 2468.00, and made the overnight low of 2466.25 within the first few minutes. The ES caught wind of the strength in Asia, and by 11:00pm CT had printed an early high of 2475.75. From there, the ES drifted sideways in a 3.5 handle range until European markets opened, and once again caught a bid, trading up to the overnight high at 2477.25. As of 6:30am CT the last print in the ESU is 2472.00, up +4.00 handles, with 156k contracts traded.
In Asia, 10 out of 11 markets closed higher (Shanghai +0.59%), and in Europe 11 out of 12 markets are trading higher this morning (FTSE +0.50%). Today’s economic calendar includes Motor Vehicle Sales, Personal Income and Outlays, Redbook, PMI Manufacturing Index, ISM Mfg Index, Construction Spending, a 4-Week Bill Auction, and Gallup US ECI.
Our View: Still Water in the Bathtub
It looks like you cannot keep this market down right now. Last Thursday, the ES traded down to 2457, and now it’s back up to within kissing distance of all time highs. Today is the first day of the month, and there could be some equity inflows. Sure, shorting the top of the range has worked much of the time, and may continue to be the case today, but we like being buyers.
Our call is that if you short, do so if the volume and momentum is sluggish in the morning, and wait for above 2480 midday. Or, you can just buy any early weakness. I’m not sure we get a near 10 handle gift today as we did yesterday. Lately traders have had to be willing to either buy the open, or a shallow five handle pullback, either way, we like buying any early weakness.
Market Vitals for Tuesday 08-01-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 10 out of 11 markets closed higher: Shanghai Comp +0.59%, Hang Seng +0.79%, Nikkei +0.30%
- In Europe 11 out of 12 markets are trading higher: CAC +0.42%, DAX +0.34%, FTSE +0.50%
- Fair Value: S&P -3.16, NASDAQ -1.48, Dow -57.28
- Total Volume: 1.2mil ESU, and 3.8k SPU traded in the pit
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