Tuesday’s Session was Cycle Day 1 (CD1): Price only produced a shallow decline (4052.25) during the overnight session, while RTH experienced a bit more confusion on direction after hitting early session highs. Range was 23.75 handles on 1.233M contracts exchanged.
…Transition from Cycle Day 1 to Cycle Day 2
This leads us into Cycle Day 2 (CD2): Expectation for this cycle day is more consolidation, perhaps with a wider range should volatility increase. Volatility Index (VIX) has been hovering with an 18 handle, which makes for intra-day trading challenging with narrowing of the range. As such estimated scenarios to consider for today’s trading.
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Chart of the Day
The rally that has lifted the S&P 500 Index above 4,000 for the first time is unusually broad. That’s evident from the percentage of the index’s component stocks that closed higher than their 200-day moving average, a gauge of price trends. Last week’s readings peaked at 94.4%, the highest since January 2010, according to data compiled by Bloomberg. They were the first to surpass 94% since May 2013 and contrasted with levels as low as 3.2% in March 2020.
S&P 500 Futures Recap – Trade Date April 6, 2021
S&P Falls After Monday’s 17th New High
After making its 17th new contract high in 2021, the S&P closed modestly lower yesterday. After trading up to 4076 around 12:00 ET the futures started selling off late in the day as the NYSE imbalance started to show $350 million to sell. As the MIM increased to $1.5 billion of sale on the 3:50 cash imbalance the futures traded down to 4058.25, 17.75 points off the high. The tech-heavy Nasdaq (NQM21:CME) closed down 0.1% and 2.5% off its record high set in February. The Dow Jones Futures (YMM21:CBOT) closed down 0.30%. The markets have been moving higher since the start of the second quarter as Covid19 restrictions have been relaxed and vaccinations, government spending and job creation have all increased. Yesterday, the IMF raised its global economic growth projection for 2021 and 2022. In terms of the day’s overall tone, the markets were firm. In terms of the day’s overall trade, it was slow, most of the day the ES was stuck in an 8-handle range and total volume was LOW at 1.2 million contracts with 205,000 of the total coming from Globex.
I don’t talk about geo-political events much but when Russia starts moving troops it’s usually for a reason. Russia has amassed thousands of troops and moved tanks near the Ukrainian border in recent days and the US State Department has called on Russia to refrain from escalating tensions and China has been running military drills just off the coast of Taiwan. Again, I rarely write about geo-political events but it looks like Russia could be its first serious test of the Biden administration’s resolve. For the last few months, I have had this feeling that something big was going to happen. I don’t know if it’s a hurricane in Florida or a war with Russia but things are just going well right now and if there was ever a time to hit the US it’s now. Finally getting the economy rolling again, stock market on new all-time highs and a new president. It all just looks too easy.
Our view, I still think the S&P is in an upward trajectory but I also still think we should see a larger pullback. Ideally, a +20 to +30 point pullback would be a good setup to get long again. Our lean, the buyers are not letting up and it looks like the NQ is headed to new highs. Buy the pullbacks. Not today or tomorrow but 4110 is on TAP.
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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