PitBull: Never Seen So Many Directional Changes

Index Futures Net Changes and Settlements:

Foreign Markets, Fair Value and Volume:

• In Asia 8 out of 11 markets closed higher: Shanghai Comp +2.20%, Hang Seng +1.61%, Nikkei +0.15%
• In Europe 12 out of 13 markets are trading higher: CAC +1.20%, DAX +1.20%, FTSE +0.74%
• Fair Value: S&P +1.69, NASDAQ +19.56, Dow -17.67
• Total Volume: 1.67mil ESU & 674 SPU traded in the pit

Today’s Economic Calendar:

Today’s economic calendar includes Personal Income and Outlays 8:30 AM ET, Chicago PMI 9:45 AM ET, Consumer Sentiment 10:00 AM ET, and the Baker-Hughes Rig Count 1:00 PM ET.

S&P 500 Futures: Never Seen So Many Directional Changes

Yesterday started with both Asia and Europe trading lower overnight, and the S&P 500 futures ‘looked’ like they were going up on Globex, but that didn’t last. After printing a new June low in the overnight session, the ESU opened the cash hours at 2701.75, down -4.00 handles. The futures rose to 2707.25 early before a heavy wave of selling pushed the index down to 2694.25. From there, buyers took it up to 2706.75 just after 9:00 before another wave of selling took the ES to a new low by three ticks at 2693.75.

When the ES failed to hold a new low, buy programs help push the index higher throughout the morning as it broke new highs into the Euro close, printing 2714.00 after 10:30 am cst. After the stop run the NQ lost momentum and the ES sold back off down to 2700.25 before rallying up to 2713.50. After a few small pullbacks the ES traded all the way up to 2726.25 at 2:24 as the MiM started to show Over $300 million to buy, and then sold off down to 2719.25. On the 2:45 cash imbalance reveal the ES traded 2719.00 as the final MiM showed small to buy. On the 3:00 cash close the ES traded 2717.50, and then went on to settle at 2719.25 on the 3:15 futures close, up +14.25 handles or +0.53% on the day.

In the end, the markets did exactly what I thought they would do, they had a short squeeze. I told people in the MTS forum and Twitter that people were too short and that there we buy stops to run, and the ES cooperated perfectly. In terms of the ES’s overall trade, all the the early whiplash and rips pushed the volume up to 1 Million. In terms of the overall tone, I think the rally was more about squeezing some shorts out than new buying.

July Outlook: June Swoon Indicates Time to Take More Risk Off For Summer

From Stock Traders Almanac: 

So far our June 21 NASDAQ Best 8 Months Sell Signal has turned out to be rather timely. From our November 28 Buy Signal to our June 21 Sell Signal NASDAQ gained 11.6%. Both NASDAQ and the Russell 2000 have given back sizeable ground since June 21. The Dow and S&P 500 have been in selloff mode a bit longer since June 13.

As of yesterday’s close this June Swoon had brought the Dow and S&P 500 into negative territory for the month of June and put NASDAQ at a hair above flat. The Russell 2000 small cap proxy index, which was leading the market for most of this spring, held up better during the recent slide.

We have been getting on the defensive since our May 2 Dow and S&P 500 Best Six Months Sell signal and it now looks like seasonal and geopolitical pressures are beginning to take a toll on the market. In yesterday’s blog post we noted the technical damage NASDAQ has suffered and how our defensive positions in Utilities, a top performing sector in the “Worst Six Months,” has been ripping lately.

Other stocks from our Defensive Basket we released on June 14 in the other top performing Worst Six Months sector in Healthcare, Information Technology and Consumer Staples have also begun to move. Spice and seasonings concern McCormick (MKC) popped 8.4% today on its Q2 earnings beat.

As June and Q2 come to a close stocks are trying to mount a rally and July is the best month of the third quarter. It remains to be seen if NASDAQ’s perennial mid-year rally can materialize and lift all stocks. But if it does it will provide ample opportunity to unload underperforming and unwanted positions and firm up your summer portfolio defense.

You can see in the updated chart below of the S&P 500 4-Year Cycle Seasonal Patterns that the blue chip index failed at resistance (red-dotted line) and did not clear the March highs. Aside from the new Defensive Stock Basket we are solidly in risk off mode. The Best Months are over, summer is worse in midterm years and the rhetoric and developments in the geopolitical arena are conspiring to spook the market.

GE’s boot from the Dow doesn’t seem to be helping matters either. And as we enter deeper into the bearish season several matters could jolt market. Trump’s scheduled tête-à-tête with Putin and the ongoing trade and tariff battles are bound to give markets a scare. Then there is the pressure of rising oil prices and the sudden bout of cold feet we are hearing from the Fed as inflation begins to percolate. High market valuations may be succumbing to bearish seasonality and midterm politicking as the market is on the brink of a technical breakdown through support.

So, stick to the drill and keep your powder dry. Raise some cash. Continue to weed out losing or lagging positions, pick up some more defensive holdings and wait for that fatter pitch we anticipate later in Q3 or early Q4 as we hit the sweet spot of the 4-Year Cycle.

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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. Any decision 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.}