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Chart of the Day
One year of recovery for the S&P 500 Index deserves another, according to Ryan Detrick and Jeff Buchbinder, strategists at LPL Financial LLC. They cited the index’s past performance after falling more than 30%, a threshold crossed in the bear market that ended last March, in a report Monday. LPL identified five other instances since World War II and found that the S&P 500 rose every time in the second year after the declines ended. Gains for that year averaged 17%, according to data compiled by Bloomberg. Any slumps in the coming year may provide an opportunity for “buying the dip,” the strategists wrote.
Powell: Higher Yields Reflects Economic Optimism
As I said in yesterday’s Opening Print when the Fed speaks the markets go down and that’s exactly what happened. The Nasdaq 100 futures (NQM21:CME) which has rallied sharply over the last several sessions fell as investors dumped technology stocks and bought the S&P 500 (ESM21:CME), Dow futures and (YMM21:CBOT), and the Russell 2000 (RTYM21:CME). At its high, the Dow was up over 350 points and closed lower. The ES was up over 20 points and closed down over 20.
As the Yellen / Powell headlines hit the tape the markets weakened and just like clockwork a late afternoon sell program showed up going into 3:00 ET. As the MIM increased to the sell-side all of the futures fell apart. In terms of the markets overall tone, they acted weakly and closed weak.
Our view, despite the comments by the Fed saying that higher yields reflect economic optimism the Nasdaq is now down 8% off its high and has not closed on a record high since February 12. The Dow and S&P have been down 4 of the last 5 sessions and are on their way to their second weekly loss. Our lean, sell the early rallies and buy the pullbacks, take profits and get short into the 3:00 sell program. Lastly, I know the markets look weak but it looks to me that the ES is in a big ‘back and fill’ pattern.
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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