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S&P 500 Futures Recap – Trade Date June 2, 2021
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Chart of the Day
Inflation Outlook Is Seen Binding VIX to Treasury Yields
“Inflation fears have been driving stock volatility” in the U.S., according to Jason Goepfert, Sundial Capital Research Inc.’s founder and president. He drew the conclusion in a post Friday on his SentimenTrader blog. Goepfert cited the relationship between the Cboe Volatility Index, or the VIX, and the yield on 10-year Treasury notes. Their 20-day correlation rose last week to its highest level since September 1999, according to data compiled by Bloomberg.
Our View
S&P 500 Futures Recap – Trade Date June 1, 2021
Dow Jones Up 5 In A Row, 1% Off All-Time High, S&P Up 4 Of Last 5, 2% Off All-Time High
I am not going to spend a lot of time on the S&P Futures (ESM21:CME), they made an early high at 4230.00 and a late-day low at 4195.50 and settled at 4206.75, up 8.25 points or up 0.20%. The Nasdaq futures closed up 0.21%. In terms of the market’s overall tone, it was another day of higher prices early and a sell-off later in the day. In terms of the overall trade, volume was low at 1.034 million contracts traded.
If there is one thing that can and will rattle the stock market it is the acceleration of when the Federal Reserve will start scaling back its massive bond programs. This week Fed policymakers said discussions could start in the upcoming meeting. Despite the Fed ‘taper’ talk, the Dow has closed higher for the fifth day in a row and is 2% away from its all-time high and the S&P closed down for the first time in 5 sessions and is only 1% off its all-time contract high. Right now the taper talk doesn’t seem to be affecting the markets but let’s not forget when the Fed ran its $800 million balance sheet up to a record $8 billion during the 2008 credit crisis when it started to taper.
I think it’s really important to understand the stock market is up 92% from the March 2020 Covid-19 lows. I would like to be short when the markets fall but I am sticking with the trend, buying the sell-offs.
Our View: There is a lot of data out this morning; Jobless claims, ISM, and the ADP number. The ES is stuck in a 40-point trading range of 4190 to 4230. Unless there is some negative headline news my guess is we move higher and there are a lot of buy stops building up above. Selling the early rallies has been key the last few days. Our lean, you can sell the early rallies and buy the pullbacks or just be patient and buy the pullbacks. Yesterday there was a big MIM buy, I suspect there will be another today but you have to keep your eye on the NQ for any after 3:00 selling. I still think 4240 is on TAP!
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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