The S&P futures (ESM15:CME) have been trading higher the last couple of days, but the volumes are historically low. After almost 3 weeks of downside price action the S&P is trying to shake off the weakness as the 1st quarter of 2015 earnings kick into gear. Holidays have a way of lowering volumes but the back-to-back US and then European holidays has really put the brakes on trading.
The S&P futures rallied again, trading above Monday’s high, but failed to follow through on the upside late in the day amid concerns about the strength of the first-quarter earnings. The S&P 500 futures have been stuck in a trading range from 2030 to 2085. When the S&P is on its lows traders call for lower prices and when the S&P is on the high end of the range traders call for higher prices. For whatever reason or reasons the S&P is in a holding pattern.
Late-Day Reversals
On Tuesday the Dow Jones futures (YMM15:CBT) erased its early gains and closed down -20 points or -0.03% to 17785.00. The S&P 500 futures (ESM15:CME) also reversed, closing down -5.4 points or down -0.20%, down to 2067.80. The Nasdaq futures (NQM15:CME) also had a late-day “flip to the downside” declining -8.25 points or -0.2% to 4334.00. One of the floor traders we talked to in the S&P pit said “It was a very low volume rally and most of the traders in the S&P pit thought the ES could sell off in the afternoon because the futures have had a hard time holding the rallies from early in the day.” Later in the day the ESM15 sold off 15 handles from its late-day high to its late-day low.
Crude oil soared again, up 3.5% to its highest close since Dec. 30 and gold fell -0.70%, down to $1,210.60 an ounce. The 10-year note yield fell to 1.8.93. Overall it was an extremely quiet day for trading. Like Monday you could see not everyone has returned to trading from the holidays. The big deal today will be Alcoa kicking off the earnings season and the Federal Reserve minutes. Right now the markets are stuck in this low-volume grind and we don’t see an end to this anytime soon.
The one rule that best applies in these types of markets right now is get in, get out, and don’t fall in love with your positions.
In Asia 7 out of 10 markets closed higher (Hang Seng +3.80%) and in Europe 11 out of 12 markets are trading higher. In today’s economic and earnings calendar: Alcoa kicks off the earnings season, MBA mortgage applications, Federal Reserve Gov. Jerome Powell’s speech on monetary policy challenges, in New York, EIA Petroleum Status Report, a 10-year note auction, and the FOMC minutes.
Our view: The ESM15 ran a good share of the upside buy stops over the last few days but ran into some late-day selling on both days. yesterday’s volume was the lowest since Jan. 2. Thin-to-win can also mean thin to lose and that’s kind of what we saw yesterday. Let’s face it: It’s dead and most traders don’t think it’s going to pick up anytime soon. I hate to say this because it sounds so stupid and it’s been said so many times before but when everyone gets short into the decline the S&P will rally and when everybody gets long into the rally the S&P will sell off. That, my friends, is how the game works.
We lean to selling the early rallies and buying weakness, with the idea that there are probably more downside stops to run for the futures to go back up.
S&P 500 Futures: Up on No Volume, Down on No Volume
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets quoted closed higher: Shanghai Comp. +0.84%, Hang Seng +3.80 , Nikkei +0.76%
- In Europe 7 of 12 markets are trading higher: DAX -0.38%, FTSE +0.46%, MICEX -1.12%, Athens GD.AT % (at 7:00 am CT)
- Fair value: S&P -7.18, Nasdaq -8.33, Dow -87.07
- Total volume: LOW 1mil ESM and 4.8k SPM traded
- Economic and earnings schedule: Alcoa kicks off the earnings season this morning, Gallup US ECI, William Dudley and Narayana Kocherlakota and Alcoa kicks off the earnings season Wednesday morning speak from the Fed, Redbook, JOLTS, 3-year note auction and the Federal Reserve minutes.
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