2018 Doubters
To all the doubters that thought the markets were going down in 2017 and 2018, it’s important to remember the stock market has never done what its been doing. Clearly irrational exuberance has taken over. Japanese stocks trading at a 26 year high, the S&P seeing its greatest run since the war, and including dividends, has gone up for 14 months in a row, the longest consecutive run since 1928. Dow Jones 25,000, a beaten down dollar, a big upswing in the Euro, crude oil pulling itself out of a multi-year slump, a rise in commodity prices, and the word ‘inflation’ almost never talked about.
How is this possible? Sure, there are reasons for investors to be wary, but that’s nothing new. Over the last several years, investors thought the markets were too overly ‘expensive’, and have continued to talk about larger pullbacks and crashes. Yes, there are dip buyers on the small pullbacks, but the S&P 500 has now gone 385 trading days without falling 5% or more from its 52-week high, the longest such streak on record. On only three occasions—in 1965, 1994, and 1996—has the S&P 500 gone 370 days without such a drop. The last 10% sell off was in Q1 2016, when the S&P 500 hit a near term low of 1810.00.
Upside Vacuum
Fridays trade started with Japan, South Korea and China closing higher, the European STOXX 600 up +0.60%, and the S&P 500 futures trading all the way up to 2734.75 after the U.S. jobs report came in lower than expect, 148,00 vs. 190,000 estimated. As of Thursdays close the ES was up +2.26%, the NQH was up +3.64% and the YM was up +1.74% year to date.
On the 8:30 CT futures open, the ES traded up to 2733.25, and then dropped down to 2726.50. After the drop, it rallied back up to 2731.25, sold off under the vwap down to 2728.50, and then popped up to 2731.50. There were two more drops under the vwap, down to 2728.80 and 2728.75, before the ES traded back up to the Globex high at 2734.75. There was another pullback to the vwap at 2731.00, and then it went on an upside rampage, with the first leg up to 2737.50. As the MiM started showing over $400 million to buy, three separate higher highs were made at 2742.50, 2742.75, and then 2743.00. The actual NYSE MOC came out $1.8 billion to buy, and the ES pulled back down to 2739.25 before making another new high by 1 tick at 2743.25 on the 3:15 futures close.
What can we say? What can anyone say? The index markets have been on a four day tear with no let up. Over the course of the week volume had picked up, and it’s all upside volume. The word ‘sell’ has not been part of the trading dictionary in the new year so far. In the end the S&P 500 futures (ESH18:CME) settled at 2742.50, up +18.75 handles, or +0.68%; the Dow Jones futures (YMH18:CBT) settled at 25,269, up +216 points, or +0.85%; the Nasdaq 100 futures (NQH18:CME) settled at 6667.75, up +64.25 points, or +0.96%; and the Russell 2000 (RTYH18:CME) settled at 1561.90, up +4.90 points or +0.31% on the day.
As always, please use protective buy and sell stops when trading futures and options.
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- In Asia 9 out of 11 markets closed higher: Shanghai Comp +0.54%, Hang Seng +0.28%, Nikkei +0.89%
- In Europe 10 out of 12 markets are trading higher: CAC +0.27%, DAX +0.26%, FTSE -0.15%
- Fair Value: S&P -0.47, NASDAQ +10.27, Dow -28.57
- Total Volume: 1.1mil ESH & 734 SPH traded in the pit
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Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Any decision to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
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