S&P 500 Futures: Nasdaq Almost At a 10% Correction
After a 45.25-handle overnight range, the S&P 500 futures opened Wednesday’s regular session at 3860.00 and traded the daily high of 3870.50 in the first ten minutes before sellers took charge, pushing the index futures lower throughout the early morning down to 3833.25 just before 9:30 CT. Bulls came in at that point giving a little life to equities, reaching 3867.00 just after 10:30 but the buying would be short-lived as sellers defended there, creating a lower high and taking control for the rest of the morning and pushing the futures down to 3847.75 just before noon. Midday, the S&Ps rallied to another lower high of 3860.75, once again rolling over to sellers who would control the afternoon pushing it down to a daily low of 3813.50 in the final minutes of the session, a 57.00-handle reversal from the early high. The index would go on to settle at 3814.75, down 58.00 handles on a total volume of a heavy 2.1 million contracts traded. In terms of price action, it was all about selling the openig rally and continuing to add on the lower highs throughout the day and covering at the close.
While the S&Ps would close down by 1.35%, the real damage was done to the Nasdaq, once again, as the index closed at the lowest levels since before Christmas, once again in negative territory for the year and down now more than 9% from the intraday all time high of February 16th.
In the Tradechat Room
MiM & SpyGate
The close was on sale yesterday. Despite multiple rally attempts, the market was not really having any of it and what was on the buy-side for the closing imbalance was quickly sold into. Not a massive wholesale type selling yet. At 15:50 our Spygate simultaneous triggered trades (STT) detected a massive sell program just before the MOC release and that started the ball rolling into the close
While there are a few rising states we remain on a good trend even though we are seeing the signs of a new wave in Sweden and other parts of Europe.
The bounce in daily tests is what we are watching as we have pauses in our daily case drop while hospitializtions and daily deaths are catching up at the end of the pipeline.
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
Buying U.S. stocks with borrowed money has yet to become excessive even after a bull-market surge, according to Stephen Suttmeier, a Bank of America Corp. analyst. Suttmeier cited a comparison between the total amount of margin debt and the S&P 500 Index’s market value in a report Monday. Margin loans rose 66% to a record $798.6 billion for the 10 months ended in January, according to data compiled by the Financial Industry Regulatory Authority. Finra’s latest total equaled 2.5% of the S&P 500’s value, below a peak of 3.1% in January 2014. “Investors are not over-levered,” Suttmeier wrote.
Yields Rise, Tech Stocks Fall
The Nasdaq 100 futures (ESH21:CME) dropped almost 3% yesterday as U.S. government bond yields rallied. Over the last 2 1/2 week decline investors have become concerned as the index markets swing from big gains to big losses. The concerns continue to grow that the $1.9 trillion Covid19 stimulus package could help push inflation higher and that the Federal Reserve will start to raise rates sooner. According to Tom Martin, senior portfolio manager and Global Investment, there is a ‘general nervousness about the rise in interest rates, clearly today we’re back at favoring value over growth and that makes sense in the context of today’s change of interest rates.’ The tech-heavy Nasdaq Composite fell 361 points and is now down 7.8% from its February 12th contract high. I will be the first to admit I did not see this long of a decline coming but by no means am I surprised.
Our View, the patterns are very visible, sell-off after the open, make a low around 10:30, stage a big rally, then start to fade and accelerate to the downside late in the session. I get the first two parts but I have not adjusted to the late-day flunks. How long will the decline last? I am not sure but if there was ever a time to reverse it would be going into Friday’s jobs report. Our lean is to buy a gap down open or the first drop after the gap down. I cannot rule out selling the rallies but I think there is a chance we see a late-week / jobs Friday rip. If not? 3760 is my next support area.
Asia and Europe are down sharply this morning.
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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