Market Review
In the battle between the Bulls and the Bears, the $1.2 trillion infrastructure bill won over the 5.4% jump in consumer prices yesterday. Inflation has been a hotly-contested focus over the past few months. Because of the chain reactions we can see, inflation can spur moves in the dollar, interest rates and commodities. As a result, that can have a big impact on the S&P too.
On the 9:30 futures open, the ES traded 4442.25, up 12.75 points, then sold off down to 4436 at 9:42. After the early pullback, the ES rallied back up to the opening level and then sold back off to 4436.25, near the early pullback low.
After a little sideways price action, the ES sold off down to the 4430.00 level at 11:54 and grinded its way back to the 4439 level at 1:10 ET. The ES pulled back down to 4437.50 just before the 3:50 cash imbalance as the MiM showed $1.3 billion to sell.
It traded 4440 on the 4:00 cash close and settled at 4441.25 on the 5:00 futures close, up 12 points or 0.27% on the day.
In the end the S&P made a choice, it overlooked a worsening CPI number in favor of the $1.2 trillion infrastructure bill and charged to another new all-time contract high.
In terms of the ES’s overall tone, it was all about the rotation out of tech and into the broader market — the S&P. In terms of the day’s overall trade, volume was steady but not large at 975,000 contracts traded.
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Chart of the Day
Moderna is pushed past Merck, Bristol-Myers in market value
Moderna Inc. emerged as one of the most-valuable U.S. drugmakers because of the success of its Covid-19 vaccine. It surpassed Merck & Co.’s market value on Monday, according to data compiled by Bloomberg. The milestone occurred less than a week after the company exceeded Bristol-Myers Squibb Co.’s value. After joining the S&P 500 Index on July 21, Moderna became the U.S. equity benchmark’s top performer. The shares surged 58% from their debut through Monday, lifting the company’s market capitalization by $72.2 billion, before sliding 5.7% Tuesday.
Our View:
The Dow and S&P settled at new all-time highs yesterday with the S&P notching its 46th new closing high in 2021. I have to admit, this has gotten silly. The total lack of pullbacks should have red flashing lights all over it. But as long as the government is supplying trillions of dollars in liquidity, it’s just impossible to fight.
Yesterday I followed my call and sold the open, but when it went down and went back up, I scratched and then watched it fall 10 points.
Maybe my impatience has something to do with being a floor trader.
Where the big S&P was $500.00 a point, I had no problem buying and selling 5 lots to 15 lots all the way up to 75 lots when I was doing crazy stuff. I had a goal I set at $6,000 a day.
Back then there was only a fraction of program trading vs. today, so catching a 3 or 4 points winner and making $4,000 or $6,000 was “easy” — but today the ES is loaded up with algorithmic and high frequency trading and it creacts what I call “false starts.”
These programs fake you out and that’s what happened yesterday. As I said in the MTS forum during Wednesday’s session, I had to fight all of July to make back what I lost early in the month. So far in August I have done OK, but I have yet to really get into a groove. The low-volume chop is great if you are not over-expecting and willing to take quick profits, but holding has not been easy. Thus I am grinding it out and it tends to wear me out.
Our Lean: As I have said in the past, I think we well know when the ES starts to really crap out. It’s up high enough that when it actually does fall hard, you will have enough time to jump on the bandwagon. In the meantime, the exceptionally low volume is definitely helping the bulls. That’s why they call it the Dog Days of Summer and it’s also why they say to never short a dull market. The time will come when traders are yelling “timber,” but so far, that time hasn’t come quite yet. Until that changes, why should our lean? Our lean is to sell the early rallies and buy the pullbacks. It’s 8:30 pm and the ES is trading 4440, only 10 points off ES 4450.
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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