Shuffle your feet traders, the end of the 3rd quarter is only 8 trading days away, and it’s setting up to be doozey. After last week’s short covering ‘squeeze’ the ESZ15 made it all the way up to 2011.75 before falling back below 1950 on Friday. Just like the PitBulls rule, the S&P tends to rally early in the day and early in the week during a bear market, and that’s exactly what happened.
Ever since 1950 first traded in late August, MrTopStep predicted that level would become the new 2100 that we talked about for so long in the S&P futures contract, and it has been that same magnet. Every time it seems like price wants to clear and hold above that level and aim for higher prices, sellers come in and take it right back to that level. It’s very telling that since that level first traded on August 24th there have been 19 trading days with all having traded within 22 handles of 1950.
The stats going into the month’s end are bearish. This includes the post Quad Witch week of September closing lower 21 of the last 25 years. Also, of the final trading days of the month, there is only one day that has averaged a higher close since 1950. Also, there has been a tendency, since late last year, for the S&P 500 to limit gains in the week following expiration and typically trade to the low of the month sometime before month’s ending, which is what the futures did last night early in the session. However, the S&P futures have traveled a long way down from 2011.75, and to take a further leg lower would mean, at this point, breaking through some price area’s that have been holding well as support since the post panic of August, particularly the 1900-1935 price area. And with the S&P already down so much from last week it’s hard not to think there could be some bounce soon.
There are 8 trading days left in September and 22 trading days in October. Additionally, there is a very active economic calendar into the end of the quarter. This week there are 20 economic releases, 10 T-bill or T-bond auctions or announcements, four Federal Reserve bank presidents speaking, Janet Yellen speaks, and the US GDP. The final three trading days of September and the first two trading days of October includes the end of the quarter rebalance, 22 separate economic releases, 5 Federal Reserve bank presidents speaking, Janet Yellen speaks, 9 T-bill or T-bond auctions or announcements and the September jobs report. We still maintain that the S&P is going to continue to be volatile. History tells us that September and October are known for have some big drops, but history also tells us that October is also known as the ‘bear killer’.
On Friday’s session globex opened slightly lower and then travelled nearly 7 handles higher early in the Asian session, making an overnight high of 1983.00 before travelling 39 handles lower during the Euro session, making a low of 1944.00, and opening the U.S. cash session at 1949.00. On the regular-trading-hours (RTH) open, the ESZ travelled up to 1967.50, up 18.50 handles from the open, into the Euro close before midday selling which took the index futures below the overnight low all the way down to 1941.25, two ticks shy of 70 handles from the post FOMC high the day before. Friday’s price settled at 1951.25 after rallying into the close in the face of a strong market-on-close sell imbalance, but still closed 24 handles lower on the day.
Last night the S&P futures opened a handle lower and traded down early finding a low of 1938.50, 11 handles from the opening, only to rally late in the Euro session to above Friday’s low. It is currently 6:30 am CST and the ESZ15 is trading at 1963.50, up 25 handles from the low, and up 13 handles on the day.
In Asia, 9 out of 11 markets closed lower (Shanghai Comp. +1,89% ), and in Europe 10 out of 12 markets are trading higher (DAX +0.23%) this morning. Today’s economic calendar starts with the Existing Home Sales, Atlanta Fed Business Inflation Index and Atlanta Federal Reserve Bank President Dennis Lockhart speaks in Atlanta.
Our View: At 7:00 CT Sunday night the ESZ15 was down 11.75 handles. There were a lot of negative overtones to last week’s rally and sell off, and most thought the ES could be down overnight, but the ES is coming in higher this morning. Overall it was a quiet Globex session. Our view is to sell the early rallies and buy weakness.
MrTopStep Radio Show today at 7:55am and 11:55am CT
- In Asia 9 out of 11 markets closed lower : Shanghai Comp. +1.89%%, Hang Seng -0.75%, Nikkei -1.96%
- In Europe 7 out of 12 markets are trading higher : CAC +1.08%, DAX -0.30%, FTSE +0.80% at 6:30 am CT
- Fair Value: S&P -10.32 , NASDAQ -13.62 , Dow -1-7.70
- Total Volume: 2.4mil ESZ and 15k SPZ
- Economic calendar : Existing Home Sales, Atlanta Fed Business Inflation Index and Atlanta Federal Reserve Bank President Dennis Lockhart speaks in Atlanta.
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