By the time everything is tallied up, the major U.S. indices will have gone out on a high note. The stock markets reacted in kind to almost everything the public thought was wrong; they skyrocketed in the final quarter of 2016.
For the past six trading days the the S&P 500 futures (ESH17:CME) have not moved very much. With the exception of Wednesday December 21, all the daily net changes have been under 9 handles, basically flatlined.
As the markets move into the final three trading days of the year, the main chatter around the CME trading floor and the NYSE is the end of year rebalance. The big institutions will be buying bonds and selling stocks to the tune of over $40 billion for sale late Friday or the last trading day of 2016. We said over two weeks ago that we thought there would be a big asset allocation, and hearing that there is over $40 billion in stock for sale is exactly what we were looking for.
As the end of 2016 approaches we think it’s important to look back at some of the market moving events that affected the S&P over the last year. We also think it’s important to recognize that Trump ‘fever’ has helped push stocks higher, but with a new year on hand, and the president elect set to take office on January 22, that reality may begin to set in. It’s a big job Mr Trump has taken on, and the Russians and Chinese are already testing the waters.
Yesterday was more of the same low volume chop. The S&P 500 futures opened the regular session at 2262.25, up 2.5 handles, and rallied up to 2269.50, matching last week’s high. From there the ES traded top heavy and retraced five handles down to 2264.25, before making a lower high in the afternoon, and eventually fell going into the close. The futures traded down to 2260.50, back below the open, in the closing minutes, and settled the day at 2260.75, up 1 handle on the day.
Last Call For 2016
| Date | Net Change | Settlement | Volume |
| Monday Dec 19 | +5.00 | 2260.75 | 921k |
| Tuesday Dec 20 | +6.25 | 2267.00 | 826k |
| Wednesday Dec 21 | -8.75 | 2258.25 | 650k |
| Thursday Dec 22 | -0.25 | 2258.00 | 832k |
| Friday Dec 23 | +0.75 | 2258.75 | 391k |
| Monday Dec 26 | CLOSED | ||
| Tuesday Dec 27 | +1.00 | 2260.75 | 498k |
| Wednesday Dec 28 | |||
| Thursday Dec 29 | |||
| Friday Dec 30 |
You can clearly see the lack of trading volume in the index futures markets. It seems like more traders are taking time off rather than rolling the dice into the end of the year. My guess is that it stays quiet right into Friday, and then we see a jump in volume due to the end of the year rebalance. The other thing, don’t expect the markets to pick up right away next week. I do not think anyone is in a hurry to get back, and inclement weather across the U.S. is causing hundreds of flight cancellations.
Top Notch Trading Morning Bond Report
Asia and Europe
Overnight global equity markets saw a very quiet and mixed trade. The benchmark S&P 500 futures saw a bid for much of the night after opening globex at 2262.00. The ESH17 made a low at 2261.00 on the open, before rallying up to 2266.50 early after the Euro open, and found a lot of resistance there. The ES last traded at 2265.50, up 4.5 handles and 1 handle off the overnight high, on volume of 40k as of 6:20 am cst.
In Asia, 6 out of 11 markets closed higher (Shanghai -0.40%), and in Europe 6 out of 11 markets are trading higher this morning (FTSE +0.46%). Today’s economic calendar includes Redbook, Pending Home Sales Index, a 2-Yr FRN Note Auction, and a 5-Yr Note Auction.
Our View
Yesterday’s total volume was under 500,000 contracts traded, and that includes the pre- 8:30 Globex volume. I am sure the CME Group did not expect that! It’s 7:00 am CT and the ESH sold off down to 2260.50 overnight, and is back trading at 2267.00 as I get to my PC this morning. First off, there are very few people trading / online this morning, and that number should get smaller and smaller as the week rolls on.
Big for sale on Friday? I feel pretty confident about that. Is the ESH17 going to sell off hard? I don’t think so. In most cases most the selling will be bought / paired off. Will there be a MrTopStep ‘Walk Away’ trade? I think there could be. (Read the MrTopStep Trading 101 Guide to learn more about the Walk Away trade) As for today, our view is to buy weakness, using tight sell stops. Look for support at the 2260.50 level down to 2258.00.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets closed higher: Shanghai Comp -0.40%, Hang Seng +0.83%, Nikkei -0.01%
- In Europe 6 out of 11 markets are trading : CAC -0.05%, DAX -0.02%, FTSE +0.46% at 6:00am ET
- Fair Value: S&P -4.33, NASDAQ +0.34, Dow -64.99
- Total Volume: 498k ESH and 1.7k SPH traded
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