The S&P did exactly what we said it would do yesterday; it sold off. The S&P 500 futures began yesterday’s trade by going up, but quickly reversed when crude oil started to slide. The 30 year bonds traded down to 164.31 early in the day and then shot up to a high of 167.04. Oil got slammed when Saudi Arabia Oil Minister Ali al-Naimi said, “There is no sense in wasting our time seeking production cuts,” and continued on to say, “A freeze in output, would slowly allow the ample inventories of crude oil to shrink, but it’s going to take time.” His comments rocked the energy markets, dragged down the stock market and helped push bonds higher, a complete reverse of what the markets had been doing since the Feb 18th low. A late day MOC $325mil to buy helped short cover the future’s going into the cash close but right on the 3:15 futures close the ES traded down to the 1815.00 level. We are not going to do a play by play of the day’s trade. Our call for the day was right on, as were the warnings we put out in the MrTopStep forum, the ICEChat, and the Twitter feeds that the S&P was going down. In the early part of the day I put out a message that the ESH16:CME would trade down to the 1918.00 to 1915.00 level, and the low in the day session was 1915.25.
We have been asking traders if they thought the low was in, while at the same time warning people that most of the problems causing the market meltdown in the beginning of January were still not resolved, and that it was too early in the year to see a sustainable rally in the S&P. When crude oil is falling so strongly it’s extremely difficult to be buyers of equities. Sure, the seasonality suggests a rise in crude and equities over the next couple quarters, but if this year’s pattern resembles what is becoming the new norm, then any bounces will not be sustainable. Also, going into the fall when crude historically tops out along with equities, and given the U.S. Presidential election, the potential exists for not only the 1802.50 lows to quickly be revisited, but 1750, 1650 and even 1550 in the S&P 500.
In Asia, 8 out of 11 markets closed lower (Shanghai Comp +0.88%), and In Europe 12 out of 12 markets are trading lower this morning (DAX -2.38%). Today’s economic calendar includes the MBA Mortgage Applications, Jeffrey Lacker Speaks, PMI Services Flash, New Home Sales, EIA Petroleum Status Report, 2-Yr FRN Note Auction, 5-Yr Note Auction, Rob Kaplan Speaks, and James Bullard Speaks.
Our View: We are trying to revamp the Opening Print to focus more on the current day rather than yesterday. The Opening Print, is a funny thing, a small time trader from the floor throwing out his views to a small global following, and the question is why? At the end of the day, life and trading have many things in common. Or better yet, many of the things we use in trading we using in real life, like trying to make money with money and how to preserve it. Like we have often said, many of the best floor traders knew how to make it, they just didn’t know how to keep it.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed lower : Shanghai Comp +0.88%, Hang Seng -1.15%, Nikkei -0.85%
- In Europe 12 of 12 markets are trading lower: CAC -2.14%, DAX -2.38%, FTSE -1.55% at 6:30am CT
- Fair Value: S&P -3.12, NASDAQ -1.70, Dow -32.44
- Total Volume: 1.6mil ESH and 5.3k SPH
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