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S&P 500 Futures Recap – Trade Date May 21, 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


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Our View

The Week Ahead : Bitcoin Volatility And Personal Consumption 

The Dow and S&P closed lower and Nasdaq closed higher last week. The markets were weak early in the week, firmed up on Wednesday and Thursday, and ‘tried’ to rally Friday but succumbed to some late day weakness. Signs of a pick-up in inflation are pushing some traders to protect their positions against the threat. The problem facing investors was apparent this month when new data showed a surprisingly large jump in consumer prices. Rather than rising, a collection of assets generally thought to safeguard investors against inflation fell after the report and the price of the 10-year note saw its biggest one-day decline in a month. REITs fell the most since January. 

In the week ahead, traders will get a better look at the inflation picture when the Commerce Department updates the Federal Reserve’s preferred inflation gauge, the personal-consumption-expenditures price index, on Friday.  According to research by Sean Markowicz, strategist at Schroders Asset Management from early 1973 through last December, stocks delivered positive inflation-adjusted returns in 90% of rolling 12-month periods that occurred when inflation, as measured by the consumer-price index, was below 3% and rising but that fell to only 48% of the periods when inflation was above 3% and rising. I agree there has been a pick up in inflation and though I do not think it’s large enough to reverse the stock market,t it’s clearly had a negative effect on the tech sector and some of the most owned names. 

Our view: According to the Ned Davis S&P cash study, the day after the May expiration is historically bullish but the volatility in crypto currency’s movements (down 18% Sunday night) – suggests stocks could continue to be volatile in the week ahead. There is no doubt there has been a big two-way flow and a big surge in stock rotations. Based on the late-day drop and pop I think the ES will rally, I’m just not sure it will hold. Sell the early rallies and buy the pullbacks in the first part of the day and keep an eye on the Nasdaq late in the day for any late weakness.  I see 13,600 as big resistance. 

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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