Market Review
Wednesday was a very interesting, yet choppy session. Not choppy in a bad way — there was plenty of two-way action — but it lacked direction. The Nasdaq was a clear leader on the day, even though it only finished higher by 0.18%. That was far better than the ES’s 0.46% decline, the Dow’s 0.88% fall, or the Russell’s 1.25% pullback.
We had a disappointing ADP report in the morning that weighed on U.S. equities, although the dollar fell hard and sent gold, oil, and bonds all higher in the morning. Then a much stronger-than-expected PMI report caused the dollar to spike, while the gains in commodities and bonds evaporated. An oil inventory reading didn’t help crude.
The ES sold off down to 4397.75 in Wednesday morning’s Globex session, opened the regular session at 4401.25, down ticked to 4398.50, and then rallied up to 4408.25 just after 10:00.
After the high, the ES sold off down to the 4394 area then rallied up to a higher low at 4404.50 before stumbling its way back down to 4391.25 at 11:50 ET.
The ES then traded back up to 4397.25 at 3:20 as the MiM started to show over $500 million to buy. We traded 4400 as the 3:50 cash imbalance showed $659 million to buy and then sold off down to 4393.25 going into the 4:00 cash close. From there, it settled at 4396.50 on the 5:00 futures close, down 18.5 points on the day.
In the end, the ES totally ran out of gas. In terms of the day’s overall tone, it felt like the buyers went on vacation. In terms of the day’s overall trade, volume was lower at 1.023 million contracts traded.
S&P 500 Futures Recap – Trade Date August 4, 2021
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Baxter:
Baxter is back!
Baxter way over-predicted a 32-point range yesterday when we had about 1/2 of that. ES played around the lower range all day. That did not deter Baxter from doubling down and calling for a 36-point range down to 4378 for the lower part of the range and 4414.81 on the upper end.
Chart of the Day
For S&P 500 stocks, triple-digit prices are now the rule
Share prices of more than $100 were once unusual among companies in the S&P 500 Index. Only 30 stocks were at or above the threshold when the U.S. equity benchmark peaked in March 2000, for instance, according to data compiled by Bloomberg. Now more than half of S&P 500 stocks are in triple digits, as shown by their median price, which surpassed $100 in February and has risen every month since then. Four-digit prices are more commonplace as well. Intuitive Surgical Inc. became the eighth company in the index to exceed $1,000 a share on Tuesday, though it closed just below that price.
Our View
The S&P Is Still Searching for Direction – Here’s Three Trading Options
Friday’s jobs reports loom large. I do not think the ES is “cleared for takeoff,” but it also has not broken out of its 4360-4420 trading range that it’s been stuck in. So many people are taking off for August vacations and the low volume has turned the trade into a total GRINDER. I still think there is a sizable risk to the downside but when?
I am an avid follower of the negative historical stats in the first nine trading sessions of August, while September and October are known for big crashes. However, that is not taking into account the U.S. services sector accelerating in July from the previous month and the PMI increasing to 64.1 in July, a record, from 60.1 in June and crushing estimates. Like the stock market at these levels or not, the pace of the recovery is strong. I have always said I am NOT an economist, but I am not a big believer in fighting the Fed and the endless trillions of dollars in stimulus.
Our lean is you have 3 options:
- Get short and hold,
- Sell the rallies and buy the pullbacks
- Or just buy the pull backs.
I don’t know what’s right for you, but what I do know is that the ES is just under 1.5% of its all-time high and there are all sorts of stops above 4420.
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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