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S&P 500 Futures Recap – Trade Date April 12, 2021
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Chart of the Day
GMTT / Chart of the Day / S&P 500 Index (JUN) / April 13, 2021
There is enough technical evidence that the equity markets are overstretched and due for a correction. As mentioned last week the trading volume was relatively low. On Friday it increased a little and we saw a trading volume on the ES (JUN) of just over 1 million contracts. The sentiment is still strong. At the end of last week, we took profit on the long positions in the Indices. However, the buy signal in the Indices is not yet cancelled. In the past, we have seen that even when the financial markets are due a correction that it can take a few weeks before it hits the wires. A frustration that you need to cope with being a trader based on technical models.
All that can be said is that we had some very nice profits which we cashed out on and now wait on the side-lines. The trend is your best friend and if the markets are continuing to move higher then we get a better entry-level to go short. We did say that it can take until mid-APR before the equity markets will top and show a reversal.
Today is Tuesday, let us see what the remainder of the week will bring. The S&P gives a sell signal and the green light for a short entry below: 4092.
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Our View
Slow, Low Volume Trade In Front of Earnings
The stock market has slowed over the last several sessions. Part of it has to do with investors reassessing their stock positions, some of it has to do with families taking a spring break, and part of it is investors cutting back in front of this week’s big earnings reports.
Technology companies that fell out of favor as yields rose are back in favor, leading the markets higher. Every time the Nasdaq futures dipped, the S&P (ESM21:CME) futures went for the ride. For the most part, though, the indices were stuck in narrow trading ranges until late in the day when the NQ sold off and the ES printed down to 4109.50 at 3:20 ET and then traded up to a new all-time contract high at 4124.50 on the 4:00 cash close.
In the end, it was another slow trading day on a list of many lately. In terms of the ES’s overall tone, the ES remained firm all day. In terms of the day’s overall trade, 163,000 futures traded on Globex (low) and 883,000 traded on the day session, making total volume 1.046 million contracts traded, low but in line with what we have been seeing for the last 2-plus weeks.
What does it feel like? Summer trading. But it’s only April and as we get into Opex week and earnings, the tone seems likely to change.
Our View: the ES is overdue for a pullback and I think the next few days may see that. My guess is most of the shorts have covered and now people are long at high prices and there are a lot of sell stops building up under 4104 down to 3085. Our lean is still for higher prices moving forward but down a bit short-term.
For now, sell the early rallies and buy the pullbacks.
As we all know, there’s no crystal ball when it comes to trading stocks, options or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk free for 30 days.
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.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Decisions to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
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