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S&P 500 Futures Recap – Trade Date April 26, 2021
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Chart of the Day
GMTT / Chart of the Day / S&P 500 Index (JUN) / April 27, 2021
S&P 500 Index (JUN)
The S&P reached 4186 which is our next upside target. Now still remaining targets are 4208 and 4220, as per yesterday’s update. To the downside, we get 4174 which is now support. Below 4174 we can see a fast down-move to 4164 and if that doesn’t hold, we fall back to 4151, 4134, and 4112. Our focus would be short from 4186 with a buy stop at 4192. Above 4192 close the short position and then re-open if S&P can reach its next target of 4208.
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Our View
S&P Up 6% In April
The S&P is having its best month since November. After a late-day sell-off going into Friday’s close the ES traded down to the 4163 area, short-covered and traded 4178.25 on the 9:30 ET futures open, and then rallied straight up to 4183.50, recouping Friday’s closing weakness. After the high, the ES dropped down to the 4176 area and then rallied up to the early high of the day at 4185.50 going into 10:00. Over the next 4 hours (until 2:09) the ES basically traded in a 5-handle range. After 3:00 the futures upticked as the early MIM showed over $400 million to buy. Out of nowhere a sell program hit just after 3:30 pushing the futures from 4184 down to 4173.25 in 2 1/2 minutes. The ES traded 4179 as the 3:50 cash imbalance ‘flipped’ from over $400 million to buy to $400 million to sell. On the 4:00 cash close the ES traded 4179 and then settled at 4177.50 on the 4:15 futures close, up 11.5 handles or +0.28% on the day.
In the end, the Nasdaq outperformed the S&P but both acted firm. In terms of the day’s overall trade, volume was low at 983,000 contracts traded
The Street Guy
I am not worried about selling the big tech names, in fact, I think some of FAANG will report record earnings. I am more worried about the Fed and how it deals with inflation. If you do not believe there is inflation I will give you a ‘simple’ way to look at and it’s the commodity markets. One year ago on May 1st the front month soybeans were trading $8.48, yesterday at 2:15 the (ZSK21:CBOT) traded $15.73, almost double the price in one year. Corn has gone from $360.50 up to $558.00. I hear it all the time that $100.00 doesn’t get you very much at the grocery store. Well, high commodity prices is just one of the reasons. Remember the China trade deal? Well the Chinese have never stopped buying and it has depleted our own reserves. I am not saying this is a game changer, all I am saying is it’s one example. Another good example is a year ago crude oil was trading $31.50 and yesterday it traded at a 52-week high of $61.89. Everything from hand soap to the burrito you buy at Chipotle to diapers has seen a price increase. And the cost of dining out has also increased sharply. P&G’s chief financial officer, Andre Schulten said the increase in commodity costs the company has experienced is one of the largest he has seen in his career, and he expects the pressure to grow. And chief financial officer at Coca-Cola John Murphy said “We’ve got a tried and true practice of being able to take pricing in line with inflation but the company is facing margin pressures from rising costs for key commodities such as high fructose corn syrup and packaging materials.” Look, I am not an economist nor am I a farmer but you don’t have to be either to understand that this is a big problem and could get way worse this summer. All I know is when big companies are talking about passing the cost on it comes out of our pockets.
Our view, so far 25% of the companies in the S&P have reported and the rise in commodity prices has become one of the talked about headlines. Will commodity inflation be where the crash comes from? No, I don’t think so but I also think it’s going to be a ‘long, hot summer’. Today is day one of the fed’s two-day meeting and Microsoft and Alphabet report earnings. Our lean, I remain bullish but I think today could be a down day. Sell the rallies and use tight buy stops.
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
