Fed Minutes and the S&P 500 Futures

 _{3 Day Market Delta Market Profile chart : Volume Matters}

Nothing mattered in yesterday’s S&P futures trade until the Fed minutes hit the tape. I am not sure what it was that surprised the public, or the S&P, but seconds after the Fed minutes hit the tape the ESM15 took off to the “upside”, and then in came one of MrTopStep’s favorite trading rules. Its called “fade the first move after the fed headlines hit the tape”, and it worked like a charm, initially trading up 7 handles to 2132.00 and then selling off 10 handles down to the 2121 area.

So whats new about the Fed not being able to raise rates in June? That is not a surprise, but the markets ran with it. I still do not think there will be any rate hikes this year, so does that mean the S&P is just going to go straight up? I don’t think so, but investors took the news as a positive. However, stocks tumbled in the final hour of trade. The idea of a rate hike later in the year momentarily pushed the markets into record high territory. The last time the Dow, S&P, and Nasdaq closed at record level on the same day was all the way back on December 31, 1999.

After making record highs on Monday and Tuesday, the S&P 500 futures closed down 2.1 points, or -0.1%, to 2122.50. The Dow Jones futures (YMM15:CBT) ended down 28 points, or -0.2%, at 18256.00, and the Nasdaq futures (NQM15:CME) reached its highest price since 1999 with a high of 4534.00. It has been an incredibly low volume push higher but based on this years overall price action, I have learned that getting bullish after a big rally doesn’t work real well. I just think the S&P is up too high to buy, and as I said; from 2130, I think the next 30 handes is down.

This is one time a long-term chart is especially helpful. For months we’ve seen the market rise to a new high, then taper off in about a 61.8% correction, only to start the cycle over. It’s a consistent pattern you can see if you zoom out. It’s possible this new high will be followed by a fall off next week marked by profit taking and recalculating. What will the reason be? The media will think of some reasons but often it’s better to just watch the order flow and stay on the right side of the trends. Leave the prediction to psychics and pundits.

In Asia 6 out of 11 markets closed lower, and in Europe 7 out of 12 markets quoted are trading higher this morning. Today is the busiest day of the week: Jobless Claims, Chicago Fed National Activity Index, PMI Manufacturing Index, Philadelphia Fed Business Outlook Survey, Existing Home Sales, Leading Indicators, EIA Natural Gas Report, Kansas City Fed Manufacturing Index, 3 , 6, 52 month T-bill Announcements, 2,5,7 Yr Note announcements, Stanley Fischer speaks, Fed Balance Sheet and Money Supply and earnings before the bell from AAP, BAH, BBY, BKE, BONT, BRC, CATO, DCI, DLTR, GSOL, KIRK, LNVGY, NM, PDCO, QSII, REX, RMCF, SMRT, STBA, TAOM, TSL, and TTC..

Our View: The ESM sold off down to 2115 early last night. I still think we slowly work lower but I have to admit that when the ESM sells off and the volume dries up the futures go right back up. We have a lot of economic reports and earnings this morning. Its my guess we rally a little and sell off a little. I do not know what can move the S&P off base right now but maybe some weaker than expected eco reports can start pushing the ESM down into some of the sell stops now lining the downside.

Our view is to buy weakness and sell the rallies. One negative headline could have the spoos back down at 2100.00 lickety split. And lastly, like the chart above, volume matters. Mondays volume was 915,000, Tuesday’s trade was 999,000 and yesterday’s total volume was 1 million contracts traded. Can you imagine what it will be in late June or July when it’s this low in April and May?

“The FOMC and the S&P 500 Futures”

• In Asia 5 of 11 markets closed higher : Shanghai Comp. +1.87%, Hang Seng -0.22%, Nikkei +0.03%
• In Europe 7 out of 12 markets are trading lower : DAX -0.39%, FTSE +0.11%, MICEX +0.21% , GD.AT +0.05% at 7:00 CT
• Fair Value: S&P -2.77, Nasdaq -1.27, DOW -24.66
• Total Volume: LOW 1Mil ESM and k SPM traded
• Economic calendar : Jobless Claims, Chicago Fed National Activity Index, PMI Manufacturing Index, Philadelphia Fed Business Outlook Survey, Existing Home Sales, Leading Indicators, EIA Natural Gas Report, Kansas City Fed Manufacturing Index, 3 , 6, 52 month T-bill Announcements, 2,5,7 Yr Note announcements, Stanley Fischer speaks, Fed Balance Sheet and Money Supply.
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