S&P 500 Futures Recap – Trade Date December 18, 2020
S&P 500 Futures: ES/NQ Down – RTY at New All TIME HIGHs UP 11 of Last 16
After trading in a 23.75 handle overnight range, the S&P 500 futures opened Friday’s cash session at 3716.00, up 5.00 handles, traded to a 3718.50 morning high on the open, then sold off down to a 3683.25 morning low just before 10:30 CT. After a late morning bounce to 3702.00, the afternoon saw continued selling as the ES pushed down to the daily low of 3677.50 just before 2:30. Then, in the final minutes of the session, a buying surge came in pushing the S&Ps up to an afternoon high of 3712.25 before settling at 3711.50, down two ticks.
In terms of the overall price action, it was all about selling the open, and covering as the index entered the final hour of the day. In terms of the day’s overall trade, volume was a moderate 1.6 million.
In the Tradechat Room
Quad witch and a decent sell imbalance but size is always expected during OPEX. The pending stimulus news over the weekend was enough to bring the markets higher into the close and the addition of TSLA into the SP500 swamped the MOC.
In general, the infection spread continues to improve in the USA. Three more states moved from the rising category leaving just 7 states seeing a daily rise in the number of new cases. Falling rates have improved from 21 states to 25 now with 24 holding steady. California continues to struggle and take headlines. Maine and West Virginia look like they may flatten out this week.
Wear your masks! Stay at least 10 feet behind someone wearing a mask! (Particularly in a checkout line) Stay home! Take your Vitamin D!
Chart of The Day
TSLA And Stimulus Deal Passage
Get your rally hat on ladies and gentlemen, the government finally came to terms on a $900 billion stimulus package and TSLA enters the S&P 500 Index today. Both are monumental in their own ways but for how long? TSLA is up $250 dollars since the S&P announced its move into the S&P in early November and the markets have been going up for weeks off ‘stimulus hopes’ so what’s next? I’m not sure and you know what?. People are tired and while it’s good news about the vaccine release, the new strain of Covid19 / mutation in the U.K. is definitely not good news.
If I was sitting with Jeff Hirsch the first thing I would ask him would be how his family is then my next question would be… What are the stats? According to the Stock Trader’s Almanac, the Monday after the December Triple Witching has been up 21 of the last 28 occasions and the Santa Claus rally starts on Thursday to the first two trading days of the new year. The Santa Claus rally tends to come to Wall Street nearly every year, bringing a short, sweet, respectable rally with an average gain of 1.3%. BUT and there is always a but; Santa’s failure to show up tends to precede a bear market or times when stocks could be purchased later in the year. This phenomenon was discovered in 1972. The last trading day of December has the Nasdaq down 15 of the last 19 but it was up 29 years in a row from 1971 to1999.
In the final minutes of last Friday’s session, the index funds that track the S&P began preparing to purchase billions of dollars worth of Tesla stock to match their holdings with the broad index. Today’s addition of TSLA into the broad index could cause an epic squeeze as index funds scrambled to buy shares. According to Dow Jones Market Data, in the last 10 minutes of trading, Tesla gained $33.09 or 5%, about 1.7 billion shares worth more than $150 billion traded within seconds in Nasdaq’s auction, the highest dollar amount ever.
Our view, I don’t know what to think. My street smarts tell me to be careful, that when billions of shares trade in big chunks things happen! I think the markets are overbought, overextended, and overdue for a pullback and the new restrictions in the U.K. and border closures are not good news for travel and airlines stocks. That said, TSLA’s entrance should cause a big jump in volatility. As the big dog enters the room the funds are going to have to sell other stocks, just like Friday. I got out of my long ( NQH20:CME) on Globex open for a gain of 270 points and posted it could be a sell the news event. I want to see how things unfold overnight before jumping in. There are just too many moving parts.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
As always, please use protective buy and sell stops when trading futures and options.
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