The S&P 500 Futures and the May Expiration

The S&P 500 Futures and the May Expiration

The S&P futures huffed and the S&P puffed, but finally ran the buy stops MrTopStep has been talking about—or at least part of them. Getting the S&P to do what you want when you want is not easy, but after all the false starts, it ran through the buy stops it had been building up and showed strong upside momentum.

S&P Closes at a Record

As you’ve noticed I’ve cut back on my daily reports. As far as I’m concerned it’s like seeing the same movie one hundred times. Yesterday the S&P finally started to break out on the upside. The overall price action with the exception of a few very small declines was kept very tight to the buy side. After gapping sharply higher the S&P started to take out the buy stops above 2106, the buy stops above 2110 and the buy stops above 2116.70. After all the negative talk about the German bund both the Asian and European markets firmed up giving a red light to the S&P on the upside. The S&P futures (ESM15:CME) closed 23 points higher, or +1.1%. The Dow futures (YMM15:CBT) also closed 1.1% higher, or 187 points, and the Nasdaq futures closed up 1.4%, just 0.75% away from its record highs set back in 2000. Again, trading volume was below average for the year. The German DAX is closed up 1.8%, snapping a 3 day losing streak and the dollar fell against the euro. Tech stocks close up 1.7% and the banks are all at, or near, their respective highs with JPMorgan leading the way.

The MAY Expiration

I don’t know what other traders will say about why the S&P has gone up so much, but it’s been building for weeks. The overall price action has been one of higher lows, and I believe that it was the May options expiration that caused the current push. After making people roll lower last week and this week, now traders are being forced to roll higher. When I talked to the PitBull he asked me if I thought we were going through any collars on the upside, and it sure seems that way. Meaning, as the S&P goes higher, the options sellers have to roll up, or buy futures.

S&P cash study for the May expiration

I am keeping it light. You have read enough of what I think, now its time for the S&P to react in kind.

In Asia 7 out of 10 markets quoted close higher, and in Europe 10 out of 12 markets quoted are trading higher this morning. Today’s economic and earnings scheduled starts with Empire State MFg Survey, Industrial Production, Consumer Sentiment, E-Commerce Retail Sales, Treasury International Capital and earnings before the bell from FLML and JMG.

Our View: Like the Opening Print, I believe that I have already declared myself; the risk is to the upside. There are more buy stops above but the S&P cash study is weak today, up 15 / down 16 of the last 31 occasions. And we can’t forget about MrTopStep’s rule that the S&P goes sideways to lower after a big up day… I’m leaning to an early push up and then a pull back, and we will have to see about the afternoon.

• In Asia 7 of 10 markets quoted closed higher : Shanghai Comp.-1.59%, Hang Seng +1.96%, Nikkei +0.83%
• In Europe 9 out of 12 markets are trading higher :DAX -0.1.%, FTSE +0.32%, MICEX +0.83% , GD.AT -1.83% at 7.00 CT
• Fair Value : S&P -3.59 , Nasdaq -3.64 , DOW -36.48
• Total Volume: 1.33mil ESM and 7k SPM traded
• Economic calendar: Empire State MFg Survey, Industrial Production, Consumer Sentiment, E-Commerce Retail Sales, and Treasury International Capital .

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