Market Review
David Zimmer – AMS Trading Group
After closing Thursday at 3325.54, the S&P futures (ESC20: CME) closed on Friday at 3295.47, thirty-eight points below its opening print of 3333.10. Its more than fifty-point trading range (3281.53 – 3333.18.86) gave traders a solid range to work with, the problem was too many thought the markers were going higher. 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 at 3333; a number I liked, one that provided substantial resistance. The tea leaves have changed; earnings aren’t supplying the upward motion they had in the past almost making this week’s releases moot.
Better this week to follow the rest of what is on the table. That’s why I’m not posting any charts, just the following:
https://www.fxstreet.com/economic-calendar
It’s a macro-world, folks. There’s more going on than I have time to write about so read, listen and more importantly, don’t react, rather take the time to learn. There’s much more going on with 6E, 6B, DX, ZS, NG, ZN and more.
Closing Prices
In the Tradechat Rooms
The MiM
Our Friday MiM was hiding what we all expected – a sell. With a rise into the 3:30 timeframe, the market figured that this was the best time to take advantage of the high prices and sold down. The reveal was 1.2B and, considering the day, not all too bad and the market returned. Today should be a seller as retail orders will flood in and those “passive” investors will be redeeming their ETFs. The pros will wait and pounce when the time is right.
Economic Calendar
Facts: Coronavirus Infectious Even During Incubation, Ability To Spread Worldwide Is Strengthening, say Chinese authorities.
As of Sunday evening, 2,400 cases in China, A 60% Increase
1,500 suspected cases in China
80 People Have Died In China Due to Virus, Number Climbing
Not Enough Hospital Space in China
40 Million People Quarantined
New Emergency Hospital Being Built in Wuhan
The Virus has Spread to 15 Countries
New Cases in the U.S., Canada, and Australia
China Manufacturing Hub of Suzhou Says Businesses to Stay Shut Down Until at Least February 8th Due to Virus Spread
U.S. State Department Evacuating Staff from Wuhan
At Least 1,000 U.S. Citizens Stranded in Wuhan Area
China Bans the Sale of Wild Life Products
China Orders Millions of Medical Fast Masks
China Unclear About Unclear About Risk of Virus Mutating
China Minister: Risk to Different Age Groups is Changing
Government of Bigeng Considering More Drastic Measures
Globex
| GLOBEX Session | Day Session |
| High: 3337.00 | Opening Print: 3331.50 |
| Low: 3325.00 | High: 3332.50 |
| Volume: 208,000 | Low: 3280.50 |
| ES Settlement: 3293.25 | |
| Total Volume: 2.4M |
S&P 500 Drops 1.25% as #Coronavirus Spreads, Boeing Saves the Day
The S&P 500 (ESH20:CME) was long overdue for a drop and after several very negative headlines concerning the coronavirus spreading the future finally gave way to the downside. The ES traded 3331.00 on the 8:30 futures open, made an early high of 3332.50, chopped around making several small dips and rips until around 11:00 CT when several headlines hit about the spread of the virus. With every new headline, the ES made new low after new low. At 1:20 CT, the ES made a low at 3280.50 and then bounced up to the 3298.00 area after a Boeing headline came out saying that FAA Administrator Dickson told the airlines that government approval for the MAX’s return to service has no set time frame but it could potentially come before mid-year. Clearly the early China headlines set a very negative tone and the Boeing news helped rally the futures nearly 20 handles late in the day.
At 2:30, the ES traded 3295.00 as the MIM was showing $408 million to buy. The ES traded 3290 as the final 2:50 cash imbalance showed $1.3 billion to sell, traded 3293.50 on the 3:00 cash close and settled at 3293.25 on the 3:15 futures close, down 32.75 handles or -0.98% on the day.
In terms of the ES’s overall tone, the ES acted very weakly and if it were not for the Boeing headline the futures very well could have closed on the lows of the day. In terms of the day’s overall trade, volume was very high at 2.4 million futures traded.
Chart of the Day
Top Stories on MTS Overnight:
- ‘Rumors’ references ironic against today’s backdrop
- Massive infill project making headway on Central
- Coronavirus Ends Weekly Winning Streaks
- ‘Biblical’ Locust Plague With Mega-Swarms The Size Of Cities Descends On East Africa
- Amazon Employees Publicly Condemn Company’s Communications, Climate Policies
Our View
Week Ahead: Coronavirus Death Toll Climbs, Two-Day Fed Meeting, APPL Reports
I knew after the late rally Thursday that there was a lot of China coronavirus headlines risk and, after several headlines, the news algos pounded the ES. I think we all know there is a lot of risk floating around in the stock market right now and while we can’t rule out ‘some positives’ this week, the coronavirus is over-taking the global stage. Adding to this week’s uncertainty is the fed two-day meeting this week. If they say they are going to cut back or set a date for the end QE4 the stock market will not like that either. So far the 4Q earnings have been coming in higher than expected but this week has many major companies set to report earnings. Below is a list of companies reporting.
Our view: Boeing helped pull the ES off Friday’s lows but it was kind of a bullshit story. Boeing is trying to raise $10 billion and only has commits for $6 billion and the terms on the other $4 billion are probably not going to be very favorable. Even if the MAX gets FAA approval to start flying again, one doesn’t know if they will really ever fly again.
With the Chinese stock market closed for the Lunar New Year holidays and over 40 million people locked down and a shortage of doctors and hospital space, fear and uncertainty are taking over. The virus is spreading so rapidly that we expect the headline algos to go nuts. Volatility picked up considerably Friday with the VIX up nearly 12%, we suspect that will continue. And lastly, the PitBull had a stark warning for the ETFs and asked me if I remembered what happened in August of 2015 when the ETFs and VIX were having problems giving quotes. If you recall, that was due to a very weak China PMI number and with China’s manufacturing hub of Suzhou shut down until Feb 9th or longer the level of uncertainty is reaching an extreme level that the ES will have a very hard time overlooking. Our lean continues to be a seller of rallies but we can’t rule out a few big rips.
PitBull: *OSC=Oscillator: CLH osc -34/-11 turns up on a close above 5508 , ESH osc 8/16 turns up on a close above 3346.37, VIX osc 15/-1 turns down on a close below 1284
This Weeks Earnings:
Monday, Jan. 27th
$DHI DR Horton | BMO
$S Sprint | BMO
$BRO Brown & Brown | AMC
$FFIV F5 Networks | AMC
$WHR Whirlpool Corp. | AMC
Tuesday, Jan. 28th
$MMM 3M | BMO
$HOG Harley-Davidson | BMO
$LMT Lockheed Martin | BMO
$PFE Pfizer | BMO
$XRX Xerox | BMO
$AMD Advanced Micro | AMC
$AAPL Apple | AMC
$EBAY eBay | AMC
$SBUX Starbucks | AMC
Market Vitals Technical Analysis
As always, please use protective buy and sell stops when trading futures and options.
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