- S&P, Third Straight Week of Gains
- Oil Dow 4% on the Week
- S&P 500 Only 5% off all Time Intraday High
- 8 of 10 Sectors Close Positive
- B of A +3.7%
- Dow Transports Down 2% for the week
- Goldman Reversal
It was a big week of ups and downs for the S&P 500 futures that included an early week sell off down to 1981.00, and a push back up to new highs at 2026 on Fridays 3:00 CT cash close. The big investment firms and mutual funds started buying on the last trading day of September and have not let up. The S&P is making good of bad news again and is only 5% off its intraday high. Commodities are moving up with crude oil dragging up the metals markets. After 3 straight weeks of higher closes many traders are questioning if October’s bad reputation was just a downside head fake? Is the S&P setting up another upside push, or will there be another China economic set back?
There are several reasons for MrTopStep thinking that the markets are going higher. While there is a global economic slowdown worldwide, real estate assets have been growing steadily since 2011. Last year, total assets grew by 13.7%, increased by capital flows from foreign investors. While late July and August were a bad time for the Bulls, the overall feeling of the markets has changed. According to Barron’s story ‘Bulls Gain Ground in Barron’s Fall Big Money Poll’ (http://www.barrons.com/articles/bulls-gain-ground-in-barrons-fall-big-money-poll-1445055740). A few weeks ago the S&P futures were setting up for a retest of the August 24th 1831.00 low, but the retest push only made it to 1861.00, and ever since pro’s have been in a rush to put new money to work buying stocks. While this may be a contrarian approach, it does fit the big picture of investing over the last several years. Traders will be fixated on the earnings with several big blue chip names reporting and real estate in the spotlight. Even if the the housing numbers don’t come in good the markets have been making good of the bad new for weeks. We know that this can’t last forever, and at some point the bad news will be treated as such, but we do not get the feeling that is coming this week or anytime soon.
KEY DRIVERS POINT HIGHER
Biotech stocks have going up sharply, zero borrowing cost to continue, and oil rallying are all big positives for the stock market right now. Yes, the earnings in the S&P are expected to ‘upset’, but that is how it always works. Wall Street analysts always set the bar lower and the S&P always ends up reporting better. All the drivers that have pushed the markets lower are recovering. There is no Greece, and China doesn’t seem to be the ‘big’ problem it was a few months ago. This morning the S&P futures (ESZ15:CME) traded all the way up to 2028.00 on Globex, and is currently trading at 2017.00. The markets look great, but we think the first two days of the week could be down, and then start to move back up. Remember, the best 6 month for stocks (November to April) is just around the corner, but no one is saying the ES will just keep going straight up without some pull backs. ESZ15 2150 to 2200.00 here we come…
In Asia, 8 out of 11 markets closed higher (Shanghai Composite -0.14%), and in Europe 9 out of 12 markets are trading higher this morning (DAX +0.81%). This week there are a total of 16 economic data releases, 10 T-bill or T-bond Auctions or announcements, and 1 Federal Reserve Bank president speaking. Today’s economic calendar includes the Housing Market Index, and Richmond Federal Reserve Bank President Jeffrey Lacker on the economics of early childhood education, in Richmond.
OCTOBER THE BEAR KILLER
Our View: The ESZ15 pulled back early last week and then ripped higher. I think it’s clear to see the ES is well on the road to recovery. Some traders think October is not over, and they are right, there are exactly 10 trading days left until the stock market moves into the best 6 months for stocks (November to April), but the mutual funds have already started buying for the year end march as October has had 9 of 12 trading days close higher. We have a small eco calendar today, some fed speak and some earnings. The S&P cash study has the Monday after the October expiration as being an up day. Our view is there may be some upside follow through, but we lean to selling the early rallies and buying weakness. We think Monday and Tuesday could be down days and then rally again later in the week.
As always; please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed higher : Shanghai Comp. -0.14%, Hang Seng +0.04%, Nikkei -0.88%
- In Europe 9 out of 12 markets are trading higher : CAC +0.30%, DAX +0.81%, FTSE -0.17% at 5:30 am CT
- Fair Value: S&P-7.77, NASDAQ -11.10, Dow -97.94
- Total Volume: 1.36mil ESZ and 4.2k SPZ
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