Market Review
The ES rallied up to 4419.75 on Globex Sunday night into Monday morning and opened at 4408.25, up 7 points on the day. After an early push up to the 4414.00 level, the ES started working its way lower. The ES traded 4408.00 just after 11:30 and that’s when the futures started going offered.
At 12:09 the ES traded down to 4386.50, down 33.25 points from the Globex high and down 27.5 points from the 4414 high of the day. At 2:21 the ES traded back up to 4396.75 and then traded down to a new low of4385.75, popped back up to the 4393.50- 4394.00 level, and sold off down to a new low of 4383.00 after a headline hit the tape saying that REPUBLICAN U.S. SENATOR GRAHAM SAYS HE HAS TESTED POSITIVE FOR COVID-19.
The ES short-covered up to 4386.75 as the MIM showed over $500 million to buy and traded back down to a new low of 4380.25 just before the final imbalance. The ES traded down to 4378.00 as the MIM went from $641 million to over $1 billion to buy, traded 4377.25, and up-ticked to 4381.00 on the 4:00 cash close.
In the end it seemed like the gap-up open and the early pop used up a lot of the early buying power. You could see that the ES buy imbalances were being sold. The NQ gave us a quick break below the Globex low but then recovered this level for a nice long trade that yielded a 70-handle move to the upside.
In terms of the ES’s overall tone, it acted weak but the NQ seemed to weather the storm. In terms of the day’s overall trade, volume was steady but low as 235,000 ES traded on Globex and 1.16 Mil traded on the day session for a total of 1.395 million contracts traded.
S&P 500 Futures Recap – Trade Date August 2, 2021
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Baxter:
Baxter is back! We are making his task a little bit easier. The problem we asked him to solve is “What are the likely upper and lower targets for today?”. Baxter’s answers are on the table for both the SPX index (which is the basis of data) and then adjusted for the front ES contract using the current fair value. Plot those upper and lower bands and pay attention to the total range expected today which is 31.69. Range is more accurate then levels.
Chart of the Day
China’s emerging-market stock clout brings dot-com moment
China’s clampdown on U.S.-listed companies is having a bigger effect on emerging-market stock investors than it would have years ago. The country’s standing in the MSCI Emerging Market Index leads to this conclusion. Chinese stocks rose as a share of the benchmark for 10 straight years before slipping in 2021, according to data compiled by Bloomberg. Last year, their combined weight rose above the S&P 500 Index’s peak of 34.9% for technology stocks in March 2000, when the dot-com era ended. MSCI’s index ended the year with a China weight of 36.3%
Our View
I don’t think the ES just gives up the farm so easily. Picking tops and fighting the Fed is not easy do. That said, if there was ever a time for a selloff, it’s the beginning of August. I am going to keep it short and sweet. I think we see lower prices over the next several days, but patience is a virtue and fighting the Fed is never easy. If you don’t think the S&P is going down, you can always buy a put spread and if you choose to stand aside, that’s ok too!
Our lean, I can’t rule out some type of ‘Turn Around Tuesday’ but I’m just not sure how far the ES can rally before it runs out of gas. I don’t think I have to tell you to sell the rallies and buy weakness as I have already laid out my opinion.
This may sound funny but I would rather see a gap higher than a gap lower on the open. Let’s see how it goes today.
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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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