S&P 500 Futures Recap – Trade Date July 12, 2021
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Baxter: Baxter II has some better habits.
Baxter is our emerging AI product. As we build out our datasets and update, we will begin tracking real-world AI market predictions. Today’s OHLC prediction is influenced by temporal data (Day of week, year ..) and the OPEX cycle. Baxter is not very smart yet, but he should get better. Here is what he thinks will happen today. This is the SPX index, not futures. You will need to add today’s fair value (-8.55 ) to the data to adjust.
We will also get better at presenting Baxter’s thoughts.
Baxter II fixes some errors in data preparation. We continue to build out intraday data so we can predict the shape of the day.
Chart of the Day
S&P 500 streak of beating average runs up against history:
A year-long streak for the S&P 500 Index may hit a historical hurdle in the second half, according to Stephen Suttmeier, Bank of America Corp.’s chief equity technical strategist. He analyzed the gap between the S&P 500 and its 200-day moving average in a report Thursday. The index has closed above the 200-day gauge since June 2020 and was 13% higher on average in 2021’s first half, according to data compiled by Bloomberg. There have been 34 other years since 1929 in which the S&P 500 stayed ahead throughout the entire first half, Suttmeier wrote. Only 13 of those streaks were sustained through year-end.
Our View
S&P 500 Hits New All-Time High; What Happens When the Music Stops?
I do not think you can compare the 1999-2000 tech bubble to what’s happening today. It’s just not the same animal. Back then the Nasdaq went up every day for months. We all knew on the trading floor that it would not last. Too many people were mindlessly buying who:
- Had no idea what they were buying
- Bought companies that had no balance sheet
- And (maybe the most important part) there were no Fed QE programs and the government wasn’t spending trillions in stimulus and infrastructure
“Tech Poised To Go Higher”
But — and there is always a but — the Nasdaq has been where the bulk of the big institutional money has been flowing into. Yes, some sold the stay-at-home stocks and bought small caps, but my feeling is that technology will be the center of the trading world in the years ahead. Technology is going to continue to advance and so will the technology sector. I personally see no reason that the Nasdaq Composite will not rise above 30,000 in the next few years if not sooner. I know it’s a bold call and I know it’s stepping out, but years ago the PitBull told me, “The U.S. is number one in technology and always will be, that’s why they hack all our stuff!”
I know it’s hard as an investor who has made money on his or her stock retirement account to move away from the traditional stocks to bonds, but that’s been history for a long time. Bonds are not in the allocation because of their return, they are there to protect your money. If you are ok with your money sitting idle during a historic bull market, that’s okay. You know the money is safe and not subject to a major downturn.
That said, I think a high percentage of the rotations will ultimately favor the technology sector. It’s not really a matter of “if the markets will correct,” it’s more of a “when they will correct” situation.
Yesterday, the S&P 500 futures set its 38th record closing high. The futures sold off down to 4341.75 on Globex and rallied up to the 4359 area just before the open. The ES traded 4359.25 on the 9:30 ET futures open, sold off down to the 4355 area at 9:33. After the low, the ES rallied up to 4363.50, then pulled back, and then the futures started to hit buy stops and run buy programs up to 4372.75 at 10:42.
After a 7-point pullback down to the 4366 level, the ES chopped around a bit, making two lower highs and giving us some “back and fill” price action. Bulls then got a rally up to a new high for the session: 4373.25.
The ES sold off 4 handles down to 4369.27 just after 2:00 and then rallied up to another new all-time high of 4376.25 at 2:40. Just after 3:00, the MIM started to show over $1 billion to buy and the ES traded up to 4377.25 and then dropped a few points. The ES traded 4376.25 as the 3:50 cash imbalance showed $3 billion to buy, traded 4377.00 on the 4:00 cash close, and settled at 4376.50 on the 5:00 futures close.
In terms of the ES’s overall tone, the ES underperformed the NQ before and just after the open but quickly played catch-up. In terms of the day’s overall trade, volume was steady at 1.025 million contracts traded. Was it a good day? Yes, for the bulls it was another on a list of many.
Our View
JPMorgan reports earnings and CPI comes out before the open and Friday is the July expiration. I know the ES is only 35 points from ES 4400 but like I said yesterday, I do not think it comes as easy as 4300 did, but we shall see.
I am looking for a few down days this week but the Ned Davis S&P cash study is positive Monday through Thursday. While I am bullish, it would not be surprising if we see some type of pullback this week.
Our lean, sell the early rallies/gap up and buy the 10 to 20 handle pullbacks. The ES is in need of a little back and fill at lower prices.
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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