Our view (Danny Riley): The Asian markets closed mostly higher and Europe is trading . Well, we got the down day we were looking for but overall volume was still very low. When you take out the 150,000 ESUs traded in GLOBEX just over 1mil ESU traded in the day session. Today is the first day of Bernanke’s two day testimony in Washington. Its important to remember that while the Fed may have backtracked on tapering “right now” that doesn’t mean they won’t backtrack again. Do we think the S&P is on track for 1700? Yes we do but we also understand that once the bus gets too full it moves the other way.
According to the Ned Davis S&P cash study, the Wednesday before the July expiration has been up 16 / down 13 of the last 29 occasions. Our view is there is probably more room on the down side for at least the first part of the day, as we said last Friday and Monday, there will be at least 1 down day this week. With that in mind and the fact that the S&P tends to be up a day / down a day during the expiration we lean to selling the early rally then buying weakness. The buying the weakness part didn’t work yesterday but don’t be surprised if it does today.
Lastly, before yesterday’s lower close the S&P futures had been up 13 out of the last 14 sessions, as of this morning the S&P has been up 9 out of the last 10 sessions. As always, have an exit strategy before you enter, keep an eye on the 10-handle rule, and please use stops when trading futures.
It’s 8 a.m. and the ESU is trading up 1 handle; crude is down 32 cents at 105.68; and the euro is down 17 pips at 1.3146.
- In Asia, 7 out of 11 markets closed higher (Shanghai Comp -1.0%, Hang Seng 0.28%, Nikkei 0.11%).
- In Europe, 10 out of 12 markets are trading lower (DAX -0.49%, FTSE -0.40%).
Today’s headline: Bank of England surprise hits shares, dollar steady ahead of Fed
- Total volume: (LOW) 1,171k ESU and 8.9k SPU
- Economic calendar: MBA purchase applications, Housing starts, Federal Reserve Chairman Ben Bernanke to testify before the House Financial Services Committee in Washington, EIA Petroleum Status Report and the Beige book.
- Fair value: S&P 1670.66, NASDAQ 3070.77
- MrTopStep Closing Print Video:
- Ned Davis Expiration Study for July – https://mr-topstep.com/index.php/equities/3687-expiration-study-for-july
Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.