S&P 500 Futures: March Opens In Favor of the Bulls
After a 46.50-handle overnight range, the S&P 500 futures opened Monday’s regular session at 3858.75 and traded the daily low of 3858.00 before buyers took charge, pushing the index futures higher throughout the morning up to 3899.50 just before noon. The midday pullback went to 3885.00, bringing in buyers that would again launch equities higher to the daily high of 3912.00 just before 2:00 CT. The futures pulled back to 3892.50 late in the session before settling at 3899.50, up 97.25 handles on total volume of a solid 1.6 million contracts traded. In terms of price action, it was all about buying the open, adding on pullbacks, and covering at the 2:00 high.
Given all the recent weakness in the S&Ps, it is noticeable that the index settled on Monday within 1% of its all-time highest close. Meanwhile, the Nasdaq outpaced the S&P 500 but remains 3.5% from its all-time closing high.
In the Tradechat Room
MiM & SpyGate
The early MIM was telling a sale but the 14:00 to 15:00 rally was counter-intuitive to that and then at 15:00 the markets caught on and down we went. The Actual MOC of 2.6B with a slight lean was already traded out and there was a bit of a relief rally on the MOC. To see a down MOC on such a strong up day is rather rare, it adds a bit of a bad taste on an overtly bullish market.
As we start to see an upturn in the US and Europe the race to vaccinate is ever so important. Israel still leads with a 1.2% per day vaccination rate while the US has climbed back above the 0.5% rate. The drop in the US was the result of weather, this week will tell us if the surge back up is just back and fill or if supplies and the supply chain are building.
As far as daily vaccinations, the US is closing in on that 2M a day mark which is the goal of the Biden administration to vaccinate 100M people in 100 days. Both Moderna and Pfizer are in full production mode now with Modera allowed to overfill their bottles in order to deliver more vaccines. Soon we will start to see vaccine resistance from people begin to affect these numbers.
Wear your masks! Stay at least 10 feet behind someone wearing a mask! (Particularly in a checkout line) Stay home! Take your Vitamin D!
Chart of the Day
Buying and selling of U.S. stocks surged during the past three months, and the increase signaled growing speculation. The shift was evident in the trading of shares that don’t have listings on the New York Stock Exchange or the Nasdaq Stock Market. Over-the-counter trading of those stocks climbed about sixfold from Nov. 30 through Friday to about 85 billion a day, according to a 20-day moving average compiled by Bloomberg. Composite volume in Nasdaq-listed shares rose 65% on the same basis, while the comparable figure for NYSE stocks only advanced about 3%.
Mutual Fund Monday RIP
If you were surprised by the rally you shouldn’t have been. The ES traded 3790 last week. One of the hardest but most profitable trades is jumping in when everyone is selling. This is a pattern written in stone and it doesn’t matter if it’s a 50-point decline or 250 points. What happened is the ‘guys with the better seats’ sold on Friday’s close, the last trading day of February, and jammed the money back in during Sunday night’s Globex session and into Monday’s day session. After making a low on Globex of 3812.50 Sunday night, the ES rallied all the way up to 3912.00 at 2:59 ET, 99.50 points off the overnight low. At the end of the day, the S&P logged its largest daily gain since last June as bond yields steadied. The Dow Jones futures (YMH21:CBOT) climbed 630 points, or +2.4% to 31,542.00 while the technology-heavy Nasdaq futures (NQH21:CME) jumped 403 points, or +3.02%, to 13,314.00 and even with Monday’s gains, the Nasdaq is still down 3.6% from its record close of Feb. 12. The decline in tech has hit Apple that is down 3.7% since the start of the year and Amazon is off 3.4% year to date and TSLA is only up 1.8% on the year. All three of these names matter to the S&P and Nasdaq. I am sticking with my call that the ES is going to make new highs, initially trading up to 3990 and if along the way the $1.9 trillion stimulus package is passed I think there is a clear shot at ES 4100.00. This doesn’t mean there won’t be some bumps in the road but I don’t see anything to stop it. Like the PitBull said; I have been trading for 51 years and all I can say is there was never zero borrowing cost. This is how it works now, it’s just one big program.
Our view, We live in a world of free money. Currently, the US debt stands at $29 trillion and soon to be $31 trillion. Zero-interest rates have pushed the S&P up over 577% since the March 2009 ‘Credit Crisis’ lows. While I called it correctly yesterday, I still insist that rallies like yesterday are prompted by the mutual funds buying stock and the high frequency, algorithmic trading bots adjust to the stock buying and just go into buy mode and are not finished until all the big accounts are squeezed out of their hedges/short positions in both future and options. How many ES option collars did the futures pass through yesterday. As the futures rally, the short option/premium sellers have no choice but to buy hundreds of futures or roll the positions higher. Either way, when you add it all up it becomes like the PitBull said; one big buy program. It’s 7:00 pm ET and the high in the ES is 3906.50. While today will not see a giant rip like it did yesterday we do think we will see higher prices, there is no way all the shorts have covered. Our lean, sell the early rallies and buy the mid-morning pullback.
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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