Market Review

S&P 500 Futures Recap – Trade Date May 12, 2021

Chart by AMS Trading Group

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Chart of the Day

Inflation Rate

The annual inflation rate in the US soared to 4.2% in April of 2021 from 2.6% in March and well above market forecasts of 3.6%. It is the highest reading since September of 2008, amid a surge in demand as the economy reopens, soaring commodity prices, supply constraints. There is also a base effect weighing as the coronavirus pandemic dented economic activity bringing the inflation rate to 0.3% in April 2020. The biggest increases were recorded for gasoline (49.6% vs 22.5% in March), fuel oil (37.3% vs 20.2%) and used cars and trucks (21% vs 9.4%). Inflation also accelerated for shelter (2.1% vs 1.7%) and new vehicles (2% vs 1.5%) and rebounded for apparel (1.9% vs -2.5%), but slowed for medical care services (2.2% vs 2.7%) and food (2.4% vs 3.5%). Meanwhile, compared to March, prices rose 0.8%, the most since 2009 while monthly core consumer inflation increased 0.9%, the most since 1996. source: U.S. Bureau of Labor Statistics

Our View

Consumer Prices Rise, Stocks Fall

The stock market has taken a ‘shellacking’ over the last three days. The Dow and S&Ps 3-day declines are the largest in 7 months. The markets were already weak but when consumer prices jumped 4.2 % from the previous year, the largest 12-month increase since the summer of 2008, the decline in the markets accelerated. The faster jump in prices only adds fear that inflation could push the Federal Reserve to raise rates sooner. The tech-heavy Nasdaq fell 2.7% yesterday and has had its worst three days since early March. The Dow Jones fell 2% or 681 points and is down 3.4% on the week and the S&P fell 89 points or 2.1%, down 4% on the week, its largest 3-day decline since late October. Google fell 3.1% and TSLA slid 4.4%.

Just last Friday, the ES made its 26th new record high for the year at 4238.0 and made a low on Globex last night at 4051.00, a 187 point drop since the new contract high. I am going to be straight up; I have not called this decline or traded it very well. I am a bull market guy and I am a knife catcher and none of my tricks have worked. I will reiterate; I am not surprised at all. In terms of the market’s overall tone, the ES and NQ weakness was overwhelming. In terms of the day’s overall trade, 2.55 million futures traded.

Our view, we will be looking for a low today and a rip. Our lean is to buy the weakness. Tomorrow is the Friday week two options expiration. I don’t think this will come easy but I think the odds favor a bounce. 

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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