After a 70-handle overnight range, the S&P 500 futures opened Monday’s regular session at 3848.75 and traded up to 3862.25 before selling down to the daily low of 3829.50, a 32.75-handle turnaround just before 9:00 CT. From there, buyers came in pushing the S&Ps higher through the next 45 minutes to a 3876.50 midmorning high and then down to a late-morning low of 3853.25. During the noon hour, dip buyers came in pushing the ES to the daily high of 3878.75 just after 12:00, a 49.25- handle rally from the morning low.
However, pessimism would return in the afternoon as sellers came in at 1:30 and stocks began the dump to 3844.00 just before one, then after a lower, mid-afternoon high of 3863.25, sellers would control the remainder of the cash session pushing to a daily low of 3816.25 just before 3:00 and eventually got a lift to settle at 3829.50, down 9.50 on the day but 62.50 handles from the high.
In terms of price action, it was all about selling the 12:30 high of day and walking away to cover just before the 3:00 cash close. Total volume was another impressive session with 2.1 million contracts traded. Consistent with the trend as of late, the Nasdaq got hit the worst, down more than 2.5% on the day as the tech sector continues to trade at correction levels, down 10% off the highs of earlier this year.
In the Tradechat Room
MiM & SpyGate
Another volatile day as the market made a 40-point slide from the 14:30 candle to the close. There was no rescue in the MIM or MOC as the data was light and any lean indication had evaporated by 15:24 where the MIM actually flipped from buy to sell.
Yesterday on the SpyGate we sniffed out 265 potential program trades in S&P500 stocks. The sell-side was leading the way most of the day but by the afternoon and a strong close the buys fired off leaving the day with 140 buys and 125 Spygate sells. Total churn was $26B dollars.
The US continues to push out vaccines, now 0.65% of the population is being vaccinated per day. A goal of 1% is in sight as more vaccines are entering the market. Israel continues above 1% and Chile is making impressive progress, they are just shy of the 1% mark.
In absolute terms the US is far outpacing the world, just shy of administrating 100M vaccines.
The fully vaccinated numbers are what is needed to begin a return to normalcy. Israel now is approaching 50% of the country fully vaccinated and is beginning to use a vaccine passport system to be used for opening up the country. The US and Serbia are just under the 10% mark. The US now has 18% of the country vaccinated with at least one dose which means 4 weeks from now we should have 18% double vaccinated since there is 4 weeks between first and second doses.
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
The Dow Jones Industrial Average would have been decidedly better off without a change made more than six months ago. Exxon Mobil Corp., which had been in the Dow since 1928, was removed and Salesforce.com Inc. took its place. Exxon climbed 53% from Aug. 31, the date of its ouster, through Friday. Only Goldman Sachs Group Inc. and Caterpillar Inc. posted bigger gains in the period among the average’s 30 stocks, according to data compiled by Bloomberg. Salesforce, on the other hand, was the Dow industrials’ worst performer. The business-software maker fell 23% and cost the average about 400 points, or 1.3%.
Tech Liquidation Pushes Nasdaq Into Correction Territory
U.S. government bonds fell yesterday and have now fallen six weeks in a row. Technology stocks again bore the brunt of the selling. Tech buyers have become complacent piling into hot names. After a big rally off Friday’s low, the NQ gapped higher on Globex Sunday night, sold off 300 points, short covered before the Monday open, traded the high at 9:35, and then basically sold off all day. The Nasdaq is now more than 10% off its February 12 record high or in ‘correction territory’ Facebook (FB) lost more than 3%, Apple (AAPL) shares were down 4.2% to $116.36 and TSLA, that was trading above $900.00 in January, closed down 5.8% at $567.41 and is now down more than 20% in 2021.
The PitBull and I have known for months that everyone was long on the hot stock names and that there was going to be a selloff. We didn’t know at the time that bonds were going to crash but that doesnt matter. What matters is how long this decline is going to last. Currently, the price action in the (NDH21:CME) is very distinct, short cover and fail. It doesn’t matter if it’s a 50-point rally or 500, they just can’t hold. Last week the Nasdaq was off more than 2%, yesterday it was down 2.4%, and it has been down 3 weeks in a row.
No one knows for sure what the stock market is going to do next. That said, I think at some point the stock market will eventually digest the higher bond yields and start moving back up again and with the Nasdaq now in correction territory, you could not ask for a better starting point. Our lean, embrace the ‘chop’ Play both sides but buy the dips, the ES is going back up.
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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