Market Review
S&P 500 Futures Recap – Trade Date May 24, 2021
Economic Calendar
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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
Nvidia-Style Stock splits Are Mixed Blessing for S&P 500
Nvidia Inc.’s market-beating advance Friday in response to a stock split may be short-lived, based on recent history. The chipmaker climbed 2.6% after its board approved a 4-for-1 split, proposed for July, as the S&P 500 Index declined 0.1%. Nvidia is the 10th current member of the S&P 500 to announce a split since last year, according to data compiled by Bloomberg. Only four out of the other nine beat the index in the first three months after their declarations — including Tesla Inc., whose split preceded its S&P 500 selection.
Our View
Tech Stocks Charge Higher, Drag Dow and S&P Over 1%
It seems like new highs are always just a ‘skip and a jump’ away. I understand that there will be points and times when the market sells off but I see no reason why the stock market can’t keep rising and it all comes down to just a few things that you won’t find in your charts. It’s the same things over and over and if you can keep your cool when the markets do sell off you will be handsomely rewarded and without all the pain.
- Endless QE
- Historically low rates
- Trillion in stimulus and infrastructure
- The trend is your friend
- Don’t fight the fed and lastly…
- No place to invest but stocks
It’s 2:16 PM and the (ESM21:CME) just traded 4204.00, up 66.25 points or +1.12%. The Nasdaq futures are on their highs, up 253 points at 13,667.00, up 1.88% and both markets are still moving up. Let’s face it, folks, it’s a ‘DIP BUYERS MARKET UNTIL FURTHER NOTICE’. Late in the day, the ES pulled back down to 4193.75 as the MIM showed $268 million for sale and settled at 4199.25, up 1.14%. The Nasdaq futures ( NQM21:CME) settled at 13,649.50, up a whopping 244.25 points or up 1.82%.
I know some will say the rebound in Bitcoin helped yesterday’s stock market rebound but in reality, the uptick in crypto volatility has not had a big effect on the market. Part of this has to do with the big moves happening on a weekend or at night and in most cases, they have quickly recovered. I know there has been a lot of money made on trading Bitcoin but I am not a fan and the lack of regulation is going to continue to be a problem. The other factor, and just as worrisome, is that 75%-80% of Bitcoins are in the hands of Americans, 950 individuals have 40% of Bitcoins. Goldman Sachs and the FBI have another 15% of Bitcoins, and even 4% of addresses have 97% of Bitcoins yet the currency promotes itself as ‘decentralized.’ Unless there is a total crypto meltdown my feeling is stocks will shake off most of the bad news.
At the end of the day the S&P and Nasdaq were firm all day. In terms of the day’s overall trade, volume was extremely low at 1.01 million contracts.
Lastly, it’s important not to forget that the ES takes bad news and makes good of it and don’t forget 1 through 6 above.
Our view: While I am still looking for ES 4240 I think the odds favor a pullback today or tomorrow. ES volume got up to 2.8 million last week and dropped down to 1 million yesterday. That’s an almost 65% drop. If it’s low today, that could negate some of the weakness I am looking for. Our lean, sell the early rallies with tight stops. Ideally, a 30 to 40 point drop would be a good area to start buying again.
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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