Market Review
The Discovery Trading Group
Not much going on for the S&P 500 e-mini futures (ESH20) last Friday as the US markets moved into holiday mode for the 3-day Martin Luther King holiday weekend. A line-in-sand (LIS) resistance unfolded @ 3226.50 which the ES respected the entire US session until into the 3:00 pm ET hour when it whipsawed first down, then up just to settle right below 26.50 @ 3325.00. Trading volume was respectable, higher than expected for pre-holiday trading. Globex sent the ES down Monday morning, but the half-day trading session sent the ES back to Friday’s close to await Tuesday’s normal market open.
The continuation of the Trump impeachment Senate trial has the potential to create volatility today and through this week. An acquittal is a foregone conclusion and anything that suggests a few Republicans may vote against Trump and their party leadership could send US stocks down. Be prepared for a political circus playing out on both from the Senate floor and the Twittersphere… History will be made this week, so keep an eye on the trial. Ride the bearish trend if the trial sends the US market down. Step back, trade smart and take advantage of the increased volatility if that’s what unfolds.
Thanks for reading and all the best with your trading!
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Economic Calendar
| Globex | Day Session |
| High 3328.75 Low 3316.00 Volume 230,000 | Opening Print 3325.25 High 3330.25 Low 3319.00 ES Settlement Total Volume 1.3 Million |
S&P 500 Futures 3330.25 New All-Time High
Friday was another very choppy trading session. After trading 3316.00 to 3328.75 on Globex the (ESH20:CME) traded 3325.25 on Friday’s regular session open and basically traded just like Thursday’s session, traded in a 4 to 5 handle trading range until late in the day when the futures made a new late-day high at 3330.25 going into the 3:00 cash close.
The ES traded 3224.50 at 2:30 as the MiM showed $900 million to sell, traded 3326.25 as the final 2:50 cash imbalance ‘flipped’ to $44 million to buy. On the 3:00 cash close, the ES traded 3327.50 and went on to settle at 3324.25, up 7 handles or 0.21% on the day.
In terms of the ES’s overall tone, it acted firmly all day with the dip buyer showing up on every little pullback. The day’s overall volume was low with a total of 1.2 million with 230,000 of that coming from Globex making the total day trade volume 970,000.
Chart of the Day
Our View
#ES Up 149 Handles in
The S&P futures (ESH20:CME) have rallied 149 handles in 8 sessions from its January 8th 3081 low after the Islamic Revolutionary Guard Corps ballistic missile attack on the U.S. bases in Iraq. That’s an average gain of 18.6 handles a day. The PitBull and I are totally awestruck by the speed of the up move that literally shows no signs of retreating. I personally think this is about the fed’s current quantitative easing programs combined with an oversized abundance of new money going into stocks at the beginning of 2020 but I also think that after Iran hit the U.S. bases in Iraq that many of the big funds added protection (hedged positions) and some of the buying over the last day has to do with unwinding those hedges.
Our view, I totally agree that the markets are entering a bubble stage but in 1999 to 2000 rates were not this low and there was no QE. But the real thing here is the story that was posted by the Wall Street Journal on November 5th, 2010 titled:
The story points out that ‘Nervous investors have socked $3.4 trillion away in cash. But stocks are rising and their nerves are calming, leading bulls to view the huge cash pile as a sign that markets have room to go higher. It is’s clear to see that with so much money moving into stocks with velocity and the fed’s current QE4 program which stands at over $400 billion or $100 billion per-month that we continue to see new highs. The fed says it is not a QE program because it’s maturities of 12 months or less and therefore presupposed to roll over within 12 months but to most market pundits it’s doing the same thing as QE1, QE2, and QE3, it’s still the Fed providing liquidity, critical short-term funding for banks.
New China Virus: Cases triple as infection spreads to Beijing and Shanghai
Our view, I can’t disagree that the ES has ‘gone too far too fast’ but with so much cash piling into stocks and many investors feeling like they are ‘missing the boat,’ I really think any sell-off, whether its a 3-day sell-off or 3-week sell-off, the ‘dip buyers’ will come screaming back in. Our lean, short weeks can be long weeks! I think the ES sold off on Globex because of the headlines about the new Chinese virus. The number of cases has tripled over the weekend and the infections have spread to Beijing and Shanghai with more than 200 cases. Japan, Thailand, and South Korea have also reported cases. The new strain of coronavirus, which causes a type of pneumonia, can pass from person to person, China confirmed. Another brick in our “Wall of Worry”.If this is the case then the ES has downside potential. Add this as another brick in our “Wall of Worry”. Our lean is to sell the rallies and buy weakness keeping in mind that the virus could cause further weakness,
PitBull: *OSC=Oscillator CLH OSC -16/-2 TURNS DOWN ON A CLOSE BELOW 5594 ESH OSC 29/17 TURNS DOWN ON A CLOSE BELOW 331139 VIX OSC -10/1 TURNS DOWN ON A CLOSE BELOW 1159
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