MBA purchase applications came out at 7:00 AM, signaling continued weakness for mortgage-financed home sales. Gallup’s US Job Creation Index dropped a point due to more layoffs and less hiring by the federal government. Houses and jobs are both key metrics for the quantitative easing programs. The June consumer credit number was at the lower end of consensus. While non-revolving credit jumped, reflecting strong car sales and government buying of student loans from lenders, revolving credit, which has been volatile, had a weak month, reflecting poor retail sales.
Initially the ESU popped up to 1689.50 and then did exactly what it did yesterday: the algos and sell programs took over to the down side. We could shout out all the highs and lows but why? By 9:30 the SPU was making a low at 1680.80. After the low the ESU bounced up to 1684.00 and pulled back a few handles. By this time it was clear that Tuesday had been much busier.
After the initial down move the ESU chopped around in a 2-handle range from 1681 to 1683. Volume at 11:00 was 845k ESUs and 1.5k SPUs traded. Around 11:15 the ESU got hit by a small buy program pushing the future up to 1684.00. It was a slow grind. After a little sideways price action the ESU traded up to the 1685.50 area, found support, and rallied to the 1688 level before retreating to 1685.25 at 1:30 PM. With what looked like the beginning of an upward trend already on the chart, the market again pushed upward and topped 1689 at 2:15 and again going into the 2:45 cash imbalance.
The MIM was down for technical difficulties, but our sources sent us updates which we tweeted out: slight bias to the sell, but light.
I know I don’t write like Brian Shepard (SHPS) does. Nor do we trade the same way. That’s probably why we’ve been partners and friends all these years. I see the markets differently than he does. I stick to the basics, like algorithmic volume blips or runaway programs that we see most days. We did not see much of that today. Today was a big-time grind in the S&Ps. At 2:00 CT there was a total of 40 locals in the S&P pit and 1.15mil ESUs and 2k SPUs traded on the day, comparable to yesterday’s volume.
At 2:45 the cash imbalance showed MOC $SELL 10mil. We suspected something like that based on how the trade was going . On the 3:00 cash close the ESU traded 1687.09 and then went on to settle at 1688.20, down 5.7 handles on the 3:15 futures close.
In the end it may have been an uneventful day, but it also marked the first 3-day decline for the S&P futures this year.