[half]Investors should remain bullish this week, despite oversold conditions and uncertainty over earnings releases. Today’s economic and earnings calendar starts with Chicago Federal Reserve Bank President Charles Evans’ interview on CNBC, the Chicago Fed National Activity Index, existing home sales and the EIA Petroleum Status Report (API) and earnings from McDonald’s (NYSE: MCD), Netflix (NASDAQ: NFLX) and Texas Instruments.[/half][half][youtube id=”qWAo7fW5URg” align=”right”][/half]
The September jobs number is scheduled to be released at 8:30 ET. The estimate for non-farm payroll is 180k. Over 30% of the companies in the S&P report this week. Additionally, 140 of the largest companies report this week. It may be important to remember that what goes up must come down.[pullquote]In Asia 10 out of 11 markets closed higher and Europe is mixed to modestly higher . [/pullquote]
Investors’ sigh of relief
Global stock markets took a hit in the beginning of October but firmed as the government shutdown continued into its third week and the Oct. 17 default deadline. One the floor we saw several hedge funds hedge long stock positions by selling the S&P and it was clear to see investors had gone to the sidelines. After the deal, however, we saw a very swift reversal.
Thursday, Oct. 10, was when the mad rush to get back in started. The E-mini S&P 500 Dec 13 (ESZ13.CME) closed up 36.2 handles and over the next six trading days gained another 51.5 handles. The speed of the rally caught both the short sellers and the buyers off guard.
Last Friday the S&P 500 futures closed at an all-time new contract high, backed by strong earnings from General Electric (+3.53%) and Google (+13.80%). The S&P’s 2.4% gain was the largest weekly gain since mid-July. The Nasdaq Composite gained 51.3 points or up 1.3% and the Dow had a much narrower trading range, closing up 28 points to 15,399.
MrTopStep has a trading rule that says if the expiration closes firm, the following Monday should be firm. Additionally the Ned Davis S&P cash study shows the Monday after the October expiration up 20 and down 9 of the last 29 occasions. Friday the VIX saw its largest single-day decline in U.S. equity volatility since 2011, falling 17% to 13.04.
The S&P 500 is now up 158% since making its March 2009 low. That said, the E-mini S&P 500 Dec 13 (ESZ13.CME) is overextended short term, but that doesn’t seem to matter as low rates and cheap money are the call for the day. We lean to selling the early rally and buying weakness, but we do think this will will see some type of pullback.
As always, keep an eye on the 10-handle rule and please use stops when trading futures and options.
- In Asia, 10 of 11 markets closed higher: Shanghai Comp. +1.62%, Hang Seng +0.45%, Nikkei +0.91%.
- In Europe, 7 of 12 markets are trading higher: DAX -0.10%, FTSE +0.19%. The Stoxx 600 Index has gained 2.2% in the past five days.
- Morning headline: S&P 500 Futures Little Changed, Oil Drops to $100”
- Total volume: 1.52 mil ESZ and 5.5k SPZ traded
- Economic calendar: Chicago Federal Reserve Bank President Charles Evans interviewed on CNBC, Chicago Fed National Activity Index, existing home sales, EIA Petroleum Status Report.
- MrTopStep Closing Print video