Market Review
S&P 500 Futures Recap – Trade Date May 19, 2021
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The annual inflation rate in the US soared to 4.2% in April of 2021 from 2.6% in March and well above market forecasts of 3.6%. It is the highest reading since September of 2008, amid a surge in demand as the economy reopens, soaring commodity prices, supply constraints. There is also a base effect weighing as the coronavirus pandemic dented economic activity bringing the inflation rate to 0.3% in April 2020. The biggest increases were recorded for gasoline (49.6% vs 22.5% in March), fuel oil (37.3% vs 20.2%) and used cars and trucks (21% vs 9.4%). Inflation also accelerated for shelter (2.1% vs 1.7%) and new vehicles (2% vs 1.5%) and rebounded for apparel (1.9% vs -2.5%), but slowed for medical care services (2.2% vs 2.7%) and food (2.4% vs 3.5%). Meanwhile, compared to March, prices rose 0.8%, the most since 2009 while monthly core consumer inflation increased 0.9%, the most since 1996. source: U.S. Bureau of Labor Statistics
Chart of the Day
Quality Reversal in U.S. Stocks Works for Morgan Stanley
Stock investors would do well to consider “moving up the quality curve,” according to Mike Wilson, chief U.S. equity strategist at Morgan Stanley. Wilson made the call in a report Monday because he sees the U.S. economy moving beyond the early stages of an expansion. To illustrate the shift, he cited a Morgan Stanley index that favors Russell 3000 Index components with the highest business and financial quality and bets against their lowest-quality peers. The index rallied 12% through Monday after setting a 19-year low in March, according to data compiled by Bloomberg.
Our View
S&P Down 4 Days In A Row
I knew going into yesterday’s trade that it was going to be a wild session and it was. The ES traded 4071.75 on the 9:30 ET open, traded up to the 4079 at 9:39, and at 10:18 the futures dropped down to 4055.50. After the sell program expired the futures buy program kicked in as the NQ ripped higher taking the ES all the way up to 4108 going into 2:30. After the high, the futures pulled back a few points, and then out of the blue came a sell program that knocked the ES down to 4078 in a big 5-minute burst. The ES traded 4095 as the 3:50 cash imbalance showed $388 million to buy, and traded up to a new daily high of 4113.75 on the 4:00 cash close. The ES traded 4107.25 on the 4:15 futures close, down 7.5 points or -0.18% on the day. In terms of the day’s overall trade, volume was HIGH, 410,000 traded on Globex and 1.85 million on the day session for a grand total of 2.265 million contracts traded and the highest volume since the beginning of April.
I did very well trading yesterday. I wanted to buy a pullback and hold but all the big swings up and down made for a good two-way trade. I was going with the MrTopStep trading rule that says ‘get in/get out/don’t fall in love with your position and I didn’t!
Our view: the Ned Davis S&P cash study shows today being up 21/down 16 of the last 37 occasions and Friday is weaker at up 19/down 18 of the last 37. My guess is we rally today. I think there is a clear path to 4140 any my lean is to buy the pullbacks. Not real sure about how Friday’s May expiration will go but let’s take this one day at a time.
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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