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Well, on Thursday, the ESU17 closed firm, rallied up to 2436.75 on Globex, opened at 2431.75 on the 8:30 CT futures open. From there the ESU got hit by a few sell programs that pushed the futures down to 2420.75, and then down to 2420.25, in the early goings. Helping pressure the index lower was $1.3 trillion in SPX options expiring. After the low the ES slowly rallied back to the 2428.50 level. I think what happened was, on the 8:30 futures open, the expiring options caused selling. Once the selling dried, the pressure let up, and the short sellers put buy stops in above the market, then the buyers stepped back in and helped push the futures higher.

Typical Price Action

I have seen this type of price action many times, it’s actually fairly typical during a quad witching expiration. We always said that on a quad witching expiration the index markets are busy for the first hour (it was), dead in the middle of the day, and then see some type of action in the last hour of the day.

At 11:45 on Friday, the ESU was trading 2427.75, down 4 handles, or -0.18%. Total volume was 860,000 contracts, with 215,000 coming from Globex pre 8:30 futures open, leaving a total of 645,000 contracts traded on the day session. Everyone was waiting on President Trump’s speech on Cuba at 12:00. For the next two hours the (ESU17:CME) was stuck in a 3 handle trading range between 2425 and 2428. Just after 2:00 the ES popped up to a new afternoon high at 2429.50, and then sold off down to 2426.00.

The MiM went from $211 million to buy, to $430 million to sell, to $744 million to sell, to $1.3 billion for sale. The NQU sold off hard, but the ESU down ticked and started going back up as the MiM paired off and went from to $600 mil to sell, to a final MOC Imbalance of $980mm to BUY. Now that’s what you call a MIM flip, and its was all tied to the expiring options. #SPX #ES #SPY

In the end it was a big week of ups and down. A week ago Friday the ESU closed at 2428 and last Friday the ES closed at 2437.25… Nothing happened, right? At Fridays close the (ESU17:CME) closed down 1 handle, or up +0.50% for the week, the Dow Jones futures closed up 13 points or up +1.06% for the week, and the Nasdaq 100 futures closed down 25.25 points, or up 0.10% percent for the week.

Crude Reality

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Oil prices rallied Friday after hitting their lowest settlement of 2017. Oil futures (CLQ17:NYMEX) registered its fourth weekly loss in a row, the longest such streak of declines in nearly two years. Last week, Crude oil inventory numbers showed a rise in U.S. production, and weak domestic gasoline demand fueled concerns that the global energy market showed high levels of surplus oil, which has continued to cause widespread selling. While we expect a bounce, the overall picture points to lower prices.

While You Were Sleeping

Overnight, equity markets in Asia closed higher, and all majors in Europe are trading higher this morning, as investors have shifted their attention to Brexit talks in Europe. In the U.S., the S&P 500 futures opened the globex session at 2433.50, and made a low at 2432.75 in the first 10 minutes of trade. From there, the ES traded higher, and made an early high of 2437.50 just after 10:00pm CT. After that, the futures drifted sideways for the remainder of the Asian session, then popped up to an overnight high of 2440.25, extending the trading to 7.5 handles, as Asian markets were closing and European markets were opening. Since then, the ES has eased off a little, and pulled back to 2436.75. As of 6:20am CT, the last print in the ES is 2438.25, up 7.25 handles, with 113k contracts traded.

In Asia, 10 out of 11 markets closed higher (Shanghai +0.70%), and in Europe 12 out of 12 markets are trading higher this morning (FTSE +0.61%) This week’s economic calendar includes 17 reports, 8 Fed speakers, and 14 U.S. Treasury auctions and announcements. Today’s economic calendar includes William Dudley Speaking, a 4-Week Bill Announcement, a 3-Month Bill Auction, a 6-Month Bill Auction, and Charles Evans Speaks.

Our View

Despite showing over $1.3 billion for sale on Friday’s close, the selling was paired off, and the MiM flipped to over $800 million to buy MOC. In turn, the S&P 500 futures (ESU17:CME) rallied all the way up to 2434.50 on the 3:15 futures close. Our rule about quad witchings is that there is some decent trade in the first 45 minutes of the day, and the final 45 minutes of the day, with very little in between.

Like the S&P or not, it’s only 10 handles off its all time contract high. According to the Stock Trader’s Almanac, the week after the June Quad Witching has been down 23 of the last 26 occasions, with an average loss of -1.1%. Despite all the selling in tech stocks, it doesn’t seem to be affecting the broader market that much, and has created a lot of back and fill price action in the S&P 500 futures.

The rotation, or selling, in tech stocks is not pure liquidation. The money is moving into other indices like the Dow, S&P and Russell 2000, it’s not straight liquidation. We said over a month ago, the summer came early, and it’s our guess that as more people take time off, ‘thin to win’ is a good possibility, as is new contract highs.

Our view, according to the S&P cash study, today shows the ES down 15 of the last 18 occasions. Even though it’s not what the stats say, we lean to higher prices, and buying weakness. You can sell the the early rallies and buy weakness, but if volume is low, selling might hard to do.


Market Vitals for Monday 06-19-2017

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As always, please use protective buy and sell stops when trading futures and options.

Join Marlin Cobb and Neils Koops for a FREE WEBINAR Saturday, June 24th at 10:00am cst. Learn all about trading the close with the MrTopStep Imbalance Meter (MiM), and get some insightful tips on maximizing Investor RT charting software. Hope to see you there!

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  • In Asia 10 out of 11 markets closed higher: Shanghai Comp +0.70%, Hang Seng +1.16%, Nikkei +0.62%
  • In Europe 12 out of 12 markets are trading higher: CAC +0.91%, DAX +0.81%, FTSE +0.61%
  • Fair Value: S&P -2.45, NASDAQ +5.89, Dow -48.13
  • Total Volume: 1.3mil ESU, and 800 SPU traded


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