Market Review
The S&P 500 futures traded down to 4410.50 on Globex and opened Friday’s regular session at 4420.25. After the open, the buy programs and buyers came flooding in, pushing the ES all the way up to 4445 around 10:00 a.m.
After the high, the ES sold off down to 4433 at 10:15, rallied to a lower high, then continued the same pattern until bottoming at 4427 at 11:36. Then the bulls flipped the script, as the ES started putting in higher lows and grinding higher. Around 3:30, the ES popped to a session high of 4453, before pulling back at 3:45 as the MIM showed small to sell.
The ES traded 4451 as the final 3:50 cash imbalance showed $767 million to sell, printed down to 4445 late, and settled at 4446, up 7 points or +0.16% on the day.
In the end, the best way to describe last week’s price action is wild. In terms of the ES’s overall tone, it acts resiliently. In terms of the ES’s overall trade, only 1.13 million futures traded with 260,000 of that total coming from Globex.
Economic Calendar
Closing Prices
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Market On Close: Energy sector was in vogue on Friday’s close.
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Baxter
Baxter is our new AI trading helper. This data is early, new, and not very well tested but we want to share some of our findings. We are concentrating on the SP500 which should benefit ES futures and SPY traders.
Last Trading Day:
High: ~15:45
10:00 – 12:00 33% (wrong)
12:00 – 15:30 33% (wrong)
Low: ~09:30
09:30 – 12:00 >90% (right)
Baxter correctly called the opening low.
Today:
High:
10:00 – 12:00 28%
12:00 – 15:30 37%
Low:
12:00 – 15:30 >90%
Chart of the Day
S&P 500 buybacks return as biggest spenders take control
Companies in the S&P 500 Index returned to pre-pandemic spending on stock buybacks last quarter, and a relative handful were largely responsible. Second-quarter repurchases amounted to $198.8 billion, according to data compiled by S&P Dow Jones Indices LLC and released Thursday. The outlay was just above the $198.7 billion for the first quarter of 2020, when the coronavirus pandemic began. Last quarter’s 20 biggest spenders, led by Apple Inc., accounted for 56% of the total. The top-20 share beat averages of 38% for the past five years and 29% for the past decade.
Our View
I think the wild swings will continue. There is just too much negative headline news out there. I know the S&P should correct — and eventually, it will — but not now.
As for the supply chains, there will be shortages of almost everything you buy. Things that you have always taken for granted will be impossible to obtain. Burt Dohman wrote that “there is a good chance ‘Martial Law’ is imposed.”
My own feeling is that we survived when there were shortages in the first 6 to 8 months after Covid-19, but this may be different. I don’t believe there will be martial law imposed, but I do think it’s possible that there are massive shortages. A lot of the market timers say crazy things, but sometimes (not very often) they are right. That in itself will spook the public.
Our View
There are 4 trading sessions left in September and the final session is the end of the quarter rebalance. I think there is a good possibility the ES rips higher. September has lived up to its reputation for weakness as all the major averages have registered modest losses.
The S&P 500 is down 1.5% and on track to post its first negative month since January. The ES is about 2% off its record high from Sept. 2. The Dow is down 1.6% for the month, while the Nasdaq is down 1.4%.
Overall, traders continue to buy the dips. The S&P fell as much as 5.3% from its record during the month before turning around, but that’s measured on an intraday basis, not on a closing basis. In that regard, the ES closed lower by just 4.2% amid the latest correction. Friday marked 224 trading days since the last 5% pullback, the 8th longest streak since 1930. Last night the ES traded up to 4472 and is down 5 points. You can sell the early rallies and buy weakness or just be patient and buy the dips.
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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