OP: Powell Pumps the S&P to Another New All-Time High

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S&P 500 Futures Recap – Trade Date July 14, 2021

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Economic Calendar

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Closing Prices

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Baxter: Baxter II has some better habits.

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Chart of the Day

Commodity-related stocks turn into bargains for SocGen:

Commodity-related stocks look cheap across developed markets as anticipation of an economic recovery fades, according to Andrew Lapthorne, global head of quantitative strategy at Societe Generale SA. Lapthorne cited the valuations of energy and metals stocks relative to the MSCI World Index in a report Tuesday. Energy shares have traded this month for 33% less than the MSCI World based on projected profit, according to data compiled by Bloomberg. The comparable gap for metals stocks has reached 54%. Both discounts are the widest in more than a decade and are based on earnings estimates for the next 12 months. Lapthorne cited 18-month figures.

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Our View

Fed’s Powell Pumps The S&P 500 To New All-Time Highs

The S&P 500 futures (ESU21:CME) marched to yet another new all-time high Wednesday. After trading lower on Globex, the ES popped about an hour before the regular session open. The ES is now finding a way to grind out new highs by barely surpassing the prior high. I told you the path to 4400 wouldn’t be quite so easy. 

In the opening drive, the ES hit a new high of 4384.50, just three ticks above the prior high of 4383.75. However, it then fell 30 handles or 0.68% from those highs as we neared noon — when Federal Reserve Chairman Jerome Powell began speaking. 

He said the central bank wouldn’t hesitate to raise interest rates to keep inflation under control, but also said he expects “price pressures to ease.” Powell also reiterated that the Fed would give ample warning as to when it was planning to taper. 

That was good enough to spark a 21.75 point rally into 3:00, before the ES gave us some “back and fill” price action and settled at 4367.50, up 6.50 handles or 0.15% for the day. I could do a big thing on the “rips and dips,” but that’s boring. In a nutshell, the ES rallied early and sold off late but still managed to close higher.

In terms of the overall tone, the ES never really acted that great. In terms of the day’s overall trade, volume was low at 1.17 million futures traded, which is somewhat surprising given the intraday swings we saw and the fact that Powell was on the mic.

Our view: it hasn’t been a very good week for me. I made $2,200 and lost $7,150 on Tuesday and chiseled the loss down to $6,400 and made a little back yesterday on some small NQ trades, but got stopped out on two long NQs on Globex last night. This has NOT been an easy trade and the July expiration on Friday could make it even more difficult. 

Our lean, is the ES going to trade 4402 today? You can sell the early rallies and buy the pullbacks or just follow the trend and buy the pullbacks. 

Above is a quick look at the ES. You can see how the ES has been riding its 10-day moving average higher and how it’s been a slow melt to new all-time high after new all-time high. 

However, the last few days have seen a bit of “wobble.” After threatening to break down last week, the ES rocketed back to new highs. Now we’re seeing momentum starting to wane a bit. 

With another test down near the 10-day moving average in Thursday’s Globex session, let’s see if the bulls can find their footing and give it the boost to 4400 that we’ve been waiting for. 

A close below the 10-day moving average isn’t the end of the world, either. However, it opens the door to a test of the 21-day moving average, the 10-week moving average, and last week’s low near 4279.25.

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}