CL 300 Delta Chart
The S&P 500 futures traded up to a high of 1902.25 on Friday, then during Sunday night’s globex session the (ESH16:CME) traded up to 1904.25 and failed again confirming 1900 as strong resistance. This set up a double top above 1900.00 for the first time since the futures traded down to 1804.25 on Jan 20th.
Yesterday, after the ESH made its early low at 1881.75, it was a very slow grind back up to the 1896.00 level. The overall volume and trade of the S&P futures is a lot lower than it has been due to the blizzard that hit the northeast. With over 25,000 flights canceled, power outages, and transportation hindrances, there seemed to be a lower level of HFT, algorithmic and program trading going on.
The ESH made its high at the 1895.50 level during the time Draghi was speaking. Once he finished the futures began to tank falling down to 1868.00, -27.50 handles from the midday high, on a MOC of $410 million to sell, and settled the day near those lows.
On Monday, Credit Suisse released a note anticipating that $11 billion should flow into equity markets this week as part of the end of month rebalancing. Furthermore, the historical calendar suggests that the final week of January closes strong, even with a weaker month overall.
Overnight the futures opened at 1871.75 and drifted lower for much of the session. An early low of 1851.25 was found during the Euro session leaving the ES down 20 handles from the open and over 50 handles from yesterday’s globex high. The index futures did see a bounce in the 2:00 am CT hour as the S&P has now rallied 28 handles up to 1879.75, or up 9.50 handles on the day.
Yesterday we said that it was vital for the S&P 500 to hold the area from Friday’s globex low at 1850-1855 as support in order to see an end of month bounce. That’s exactly what the futures did overnight when the index bounced at 1851.25. The short term bull/bear lines in the sand have now been drawn at the 1850 and 1900 big round pivot areas, and going forward, whoever controls those prices will likely control the tape.
Crude oil still tends to be a drag on the market as the CLH6:NYM broke from its 2-day 20% climb and sold off more than $3.00 from the high of the day back below the $30.00 area. Overnight the oil futures have been mixed and are currently trading up a quarter to $30.60 with Iraq’s oil minister doing everything he can to pump crude higher today. With oil so weak and unable to sustain rallies traders are still having to keep an eye on the energy markets.
Lastly, the earnings releases this week will continue to keep the markets attention as Caterpillar (CAT), who is seen as an economic barometer, will report Thursday but was downgraded by Goldman Sachs this week. Also of interest will be the energy sector after Chevron reported their largest quarterly loss in 13 years but does project that this years fuel demand will begin to bridge the gap with production.
In Asia, 7 out of 11 markets closed lower (Shanghai Composite -6.42%), and in Europe 6 out of 12 markets are trading higher (DAX +0.02%). Today’s economic calendar includes day one of the FOMC Meeting, Redbook, FHFA House Price Index, S&P Case-Shiller HPI, PMI Services Flash, Consumer Confidence, Richmond Fed Manufacturing Index, State Street Investor Confidence Index, 4-Week Bill Auction, 2-Yr Note Auction and earnings from Johnson & Johnson (JNJ), Spring (S), Proctor & Gamble (PG), Lockheed Martin (LMT), 3M Company (MMM) and more…
Our View: No one has said the big ups and downs of 2016 are over. There is a ton of big name earnings out this week and that should become the market’s focus. That said oil proved itself as the main driver of the S&P yesterday, everytime CL down ticked the ESH came slamming down. Until a ‘real’ low is established in the energy markets that’s how things are going to work. Our view, sell the early rallies and buy weakness while keeping an eye on crude oil.
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‘Oil Plunges to 29.75 and the S&P Goes For the Ride’
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets closed lower: Shanghai Comp -6.42%, Hang Seng -2.48%, Nikkei -2.35%
- In Europe 6 of 12 markets are trading higher: CAC +0.17%, DAX +0.02%, FTSE -0.25% at 5:15am CT
- Fair Value: S&P -7.37, NASDAQ -9.75, Dow -86.80
- Total Volume: 1.6mil ESH and 7.3k SPH
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