Europe Unravels

Index Futures Net Changes and Settlements:

Foreign Markets, Fair Value and Volume:

• In Asia 10 out of 11 markets closed lower: Shanghai Comp -2.53%, Hang Seng -1.40%, Nikkei -1.52%
• In Europe 9 out of 13 markets are trading higher: CAC -0.26%, DAX +0.66%, FTSE +0.29%
• Fair Value: S&P -0.75, NASDAQ +2.42, Dow -3.94
• Total Volume: 1.97mil ESM & 1,320 SPM traded in the pit

Today’s Economic Calendar:

Today’s economic calendar includes MBA Mortgage Applications 7:00 AM ET, ADP Employment Report 8:15 AM ET, GDP 8:30 AM ET, International Trade in Goods 8:30 AM ET, Corporate Profits 8:30 AM ET, Retail Inventories 8:30 AM ET, Wholesale Inventories 8:30 AM ET, Redbook 8:55 AM ET, Beige Book 2:00 PM ET, Fed to Issue Proposal to Modify Volcker Rule, and Farm Prices 3:00 PM ET.

S&P 500 Futures: As Europe Tanks S&P Goes For The Ride

The global markets were down hard before Mondays 8:30 futures open. Italian bond yields rising and uncertainty in Spain were the main drivers. At midday the Euro Stoxx 600 was down -1.5%. In the US, the S&P 500 futures breached 2700.00, and traded down to 2690.00 on Globex with oversized volume of 395,000 contracts traded.

On the 8:30 futures open the ES printed 2700.50, pulled back to an early low of 2696.75, and then rallied up 2709.50 at 9:10 AM. From there, the futures pulled back to the vwap at 2703.75, and then down to the 2701.00 area. After that, the ES double topped at 2706.50, sold off to the 2696.00 area, rallied 1 tick under the vwap to 2702.25, and then got walloped as a 10:30 European close sell program hit sending the futures all the way down to 2676.50. The ES then rallied up to 2691.00 just before noon, making the mid day high.

The afternoon saw the ESM drip drop lower on a series of lower lows and lower highs as the MiM started showing strong to sell early on, in excess of over $1 billion, and the ES made a new low at 2675.00 going into the final hour of the day. During the 2:00 hour the ES held the low and began to rally after the bottom of the hour, up to 2687.75, just before the MOC came out $575 million to sell. The futures continued to rally, trading up to 2691.25, and printed 2688.50 on the 3:00 PM cash close before settling the 3:15 PM futures close at 2691.75, five ticks off the late day high, down -26.50 handles, or -0.97%

In the end, the overall price action of last week seemed to play catch up with the ES yesterday. Italy has sparked fear of a new European credit crisis. While European stocks have done well this year, it has been in light of some very weak economic data, and Italy and Spain have clearly brought wider problems to light.

MrTopStep Imbalance Meter (MiM)

May continues to see selling into the end of the month on the daily imbalances. The table below is the last 10 days on the MOC imbalances as revealed at 3:45pm ET. For those days the imbalances have been sell side for 9 days and only one day was a buy. The net sum has 7.3B sold.

Last 10 MiM Imbalances:

The Last day in May for 2016 was a buy for 1.3B and 2017 was also a buy at 1.1B.. Strong buys for those too years, but the overall on the month in those two years the imbalances were a net gain. This year’s May has been all about the selling.

If you have questions about the MiM, email me marlin@mrtopstep.com.

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As always, please use protective buy and sell stops when trading futures and options.

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