S&P 500 Futures Recap – Trade Date July 19, 2021
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Market On Close : wooo.. smaller sell than expected.
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No Baxter today. New model later this week.
Chart of the Day
Small-cap U.S. stocks’ show of strength turns to weakness
Anticipation that smaller U.S. companies would benefit more from economic stimulus than larger ones “appears to be wearing off,” according to Charlie Bilello, chief executive officer of Compound Capital Advisors LLC. Bilello cited a ratio between exchange-traded funds that track the Russell 2000 and S&P 500 indexes in a blog post Friday. A similar ratio for the ETFs’ underlying indexes fell 16% from a high in March through Friday, according to data compiled by Bloomberg. Along the way, the gauge of small-capitalization stocks’ relative strength gave back more than half of an almost year-long, 44% rally.
S&P Falls Over 90 Points On Virus Concerns
We are not going to do a big blow by blow of yesterday’s “micro crash.” The S&P 500 futures closed a few points off its low on Friday, down 41.50 points, and the pressure didn’t stop. The ES traded down to 4262.50 on Monday’s Globex session, traded 4266.75 on the 9:30 ET futures open, and then immediately started selling off.
At 10:21 am the ES traded 4331.50, down 33.5 points from the open and 87.25 points from Friday’s close. After the early low, the ES made a sequence of highs trading up to 4258.50 just before 12:00, then sold off down to a new daily low of 4227.00 at 12:54.
The futures triple topped at 4239.00 and at 1:36 traded down to the low of the day at 4224.00. After plenty of back and forth chop — and that’s really what it was — The ES had one more dip back down toward the session lows before a short-covering rally into the close.
On the 3:50 cash imbalance, the ES traded 4255 even as the imbalance showed more than $1 billion to sell. The ES traded 4254.50 on the 4:00 cash close and rallied 37 handles from the lows to close at 4261.
In the end, bond yields sank to the February lows as oil tumbled 7.5% to $66.42 a barrel and is now 10% lower than last week’s high — falling into correction territory. My feeling was that when the UAE said it was going to raise oil production with or without OPEC, the latter had no choice but to raise production in fear that other countries would do the same.
In terms of the ES’s overall tone, every rally was sold until late in the day. In terms of the day’s overall trade, volume was high but not as high as one would think based on the size of the decline. 473,000 contracts traded on Globex and 2.06 million futures traded on the day session for a grand total of 2.53 million contracts traded.
Ever since I got back from a week’s vacation, I have traded terribly. Like I said, calling it and trading it are two different things. My friend Hayes K told me several years ago that if you think the market is going down and still want to buy the dip, buy some puts.
I knew the markets were going to tumble last week and I didn’t sell it nor did I capitalize on buying the dips. I have had several “winners” that were 6 to 8 points, but I didn’t get out. Do you know why? Because I thought I knew more than the markets. Once you get in that mode you lose. This is clearly something I need to work on. Yes, don’t fight the Fed but you also can’t buy every dip. If it was that easy we would all be millionaires.
Our lean: The ES has been down for three straight days and in four of the last five sessions, shedding more than 160 points from last week’s high to Monday’s low. No one knows for sure what the market is going to do and thinking that way is a losing proposition. I think this is a buy-the-dips day, but I can’t rule out selling a rip. I posted in the MTS chat late in the day that I think the ES can trade up to 4290. Let’s see if Turn Around Tuesday works today.
In yesterday’s Opening Print, we said, “Given the magnitude of the selling pressure right now, the 10-week moving average may be in play near 4250, while the 50-day moving average comes into play at 4235.”
The 50-day moving average held as support and is giving us a bounce so far in the Globex session. From here, we need to see the ES reclaim the 4270 to 4275 area, putting 4300-ish on the table. Above that and perhaps we can retest the 10-day and 21-day moving averages.
On the downside, keep an eye on Monday’s low and the 50-day moving average. A break of the low and failure to reclaim it could put 4200 in play.
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