Market Review
David Zimmer – AMS Trading Group
The S&P futures (ESC20: CME) closed on Friday at 3225.52, fifty-seven points below its opening print of 3282.33, it’s high of the day after closing Thursday at 3325.54. Its almost seventy-point trading range (3214.68 – 3282.33) gave traders a solid range to work with, the problem was too many thought the markets were going to bounce. Into one’s life some rain must fall; the question is for how long the rain will fall and what the forecasts bring.
We’re short 10 at an average of 3311.50 and will increase on rallies. The tea leaves have changed; earnings aren’t supplying the upward motion they had in the past almost making this week’s releases moot. The Fed is still pumping money into the repo markets. I believe there’s a credit rating issue on some of the collateral being offered similar to when Lehman Brothers went out years ago. Lower interest rates signal a weakening economy and worldwide epidemics are not very beneficial; just ask the airline carriers.
Better this week to follow the rest of what is on the table. That’s why I’m only posting one chart, just the following:
It’s a macro-world, folks. There’s more going on than I have time to write about so read, listen and more so, don’t react, rather take the time to learn. There’s much more going on with 6E, 6B, DX, ZS, NG, ZN and more. Interested? Email me at david@amstradinggroup.com.
Closing Prices
In the Tradechat Rooms
The MiM
At the end of the day, the markets were down on decent selling. Still not a 9:1 down day which is a great marker for capitulation selling. You can expect the market to do a cleanse here over the next month as it will probably correct and garner strength for a new bull run. That start should be marked with a 9:1 up day or two.
HFT Alert
Another active day for the programs as 78 larger programs were detected with 38 buys and 40 sells. It’s not all one-sided yet.
Economic Calendar
Chart of the Day
Top Stories on MTS Overnight:
- Small businesses fight the flu
- Dow, S&P Now Negative for 2020
- Europe’s Worst Cities For Traffic Congestion
- Apple’s reported $200 million acquisition of…
- Bernard Ebbers, ex-CEO convicted in WorldCom scandal, dies
- Commodity Tracker: Coronavirus and commodity markets
- Dow, S&P Now Negative for 2020
- Monday: ISM Mfg, Construction Spending
Globex
| GLOBEX Session | Day Session |
| High: 3297.50 | Opening Print: 3275.50 |
| Low: 3265.75 | High: 3277.50 (Early) |
| Volume: 390,000 | Low: 3212.75 (Late) |
| ES Settlement: 3224.00 | |
| Total Volume: 3 M |
S&P 500 Death Spiral
U.S. stock indexes opened high on Globex Thursday night after Amazon (AMZN) jumped 9% after reporting Q4 net sales of $87.4 billion, stronger than consensus of $86.2 billion. But the ES gave back its gains and turned sharply lower Friday morning as news hit that the coronavirus has spread to nearly 10,000 globally in 19 countries with over 200 people dying in China.
European indices were weak before Friday morning. The ES traded 3275.50 on the 8:30 CT futures open and after a small uptick started to slide. An early high at 3277.50 was made in the first few minutes and then it sold off down to a 3 1/2 week low of 3212.75 late in the day. There were several contributing factors, the January Chicago PMI unexpectedly fell -5.3 to 42.9, weaker than expectations and the steepest pace of contraction in 4 years, the December personal income only rose 0.2% versus +0.3%, and the continued spread of the coronavirus.
The Chicago Board of Options ‘fear gauge” ($VIX) rose to a 3-1/2 month high at 19.99 and finished the day up +3.35 at 18.84%. In the end, the U.S stock markets had a very bad day driving the S&P down 3.1% from its January 17th record and into the red for 2020. In terms of the ES’s overall tone, it did bounce late in the day but I think most of that was just late day short covering. In terms of the day’s overall trade, volume was extremely high with just over 3 million contracts traded.
Our View
Tough Day for the DBOY
I have to be candid. Friday’s call was one of the worst I have ever had and one of my worst trading days in over 5 years. I clearly did not have my head on straight and I paid the price. I knew from the early price action and the continuous headline barrage of negative headlines and all the furious sell programs that things were going to get worse but by 10:00 I had beaten myself up and I had to walk away from the screens. I really do not know what I was thinking as over the last two weeks all I did was warn that China was understating the spread of the virus.
This week is going to be another big week for investors with a fresh read on manufacturing activity in the U.S. and several bellwether companies including Google parent Alphabet Inc., Ford Motor Co., and Walt Disney Co. Right now the United State’s economy is still humming along but Friday’s January jobs report could be a test if the labor market can continue its healthy pace.
While I can not rule out a further bounce I think the markets are on the offensive. After a nearly 480% rally in the S&P since March 2009, the coronavirus and the slowdown in China’s growth will continue to be a stumbling block. So far the ‘dip buyer’ seems to be taking a wait and see approach. Any break under 3200 to 3180 could signal 3150 or lower but right now I just want to get back up on my saddle and take it one day at a time. I again want to say I am sorry for last Friday’s view. It was so off I am still in shock at what I wrote.
PitBull: *OSC=Oscillator :
CLH OSC -32/-26 TURNS UP ON A CLOSE ABOVE 5090 ESH OSC -16/8 TURNS UP ON A CLOSE ABOVE 325492 VIX OSC 20/6 TURNS DOWN ON A CLOSE BELOW 1784.
Market Vitals Technical Analysis
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As always, please use protective buy and sell stops when trading futures and options.
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