Traders, it’s the same show over and over. Push the S&P futures lower, then bring back the buyers. After 4 up days in a row, can the S&P keep going up? Or is Janet Yellen going to rain on the S&P’s upside parade today?
After all the Greek and Chinese smoke cleared, there was only one thing left to take care of—the upside buys stops in the S&P 500 futures! CNBC and the Wall Street Journal may say something like “the short covering continued Tuesday”, and that would be partially correct, but the part they missed is how the headline news algos go from selling the bad news to exploiting the good news.
What you will also not hear from the Wall Street Journal or CNBC, is how the volume dropped in the S&P and what its effect has been. Clearly the ESU15 went down on big volume and is going up on extremely low volume. Literally, in 1 week, the emini S&P futures (ESU15:CME) volume has dropped from a high of 2.5mil contracts to less than 950,000, with 140,000 coming from Globex yesterday. While the rest of the world was still zeroing in on Europe, the S&P continued to grind higher, taking out buy stops all the way up to 2105.50, just two ticks away from where I said the first set of stops above 2100.00 went to.
DOW, S&P AND NASDAQ CLOSE UP 4 IN A ROW
The Dow futures (YMM15:CBT) fell 14 ticks from trading up to 18000.00 for the first time in 3 weeks and is now back up +1.3% on the year. The S&P futures (ESU15:CME) closed up +0.40% to 2102.30, up 7.7 points. The S&P is now up +2.3% year to date. The Nasdaq futures (NQU15:CME) closed up +0.70% to 4517.50, up 29.50 ticks on the day.
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The S&P is now looking past Greece, and starting to refocus on what Janet Yellen has to say when she presents at the semi-annual monetary report to the House Financial Services Committee, in Washington today. She is pushing hard for a rate hike before the end of 2015 as analysts lower their expectations for the Q2 earnings. So yes the S&P has had a good bounce, but not all the obstacles have been removed. The Shanghai Composite fell -3.03% last night.
For the first time since January, the ES closed higher 4 days in a row. Yes, we are bullish, but we don’t get the feeling the S&P is going to explode higher. The rally is occurring during the July options expiration week and volume has dropped significantly. This makes it very easy for the program and algorithmic traders to control the game. With cash to buy, the futures went up again late in the day and down ticked slightly going into the close. The VIX fell to 12.96.
We can not say the recent movement is over but what we can say is things have calmed down. We also think more traders are going to push back from the screens and go on vacation and that will only add to lower volumes.
In Asia 9 out of 11 markets closed higher, and in Europe 9 out of 12 markets are trading lower this morning. Today we have a busy economic and earnings schedule starting with the MBA Mortgage Applications, PPI-FD, Empire State Mfg Survey, Industrial Production, Atlanta Fed Business Inflation Expectations, Yellen Speaks, EIA Petroleum Status Report, Loretta Mester speaks, Beige Book, John Williams speaks, and earnings from BAC, DAL, NFLX, INTC, PNC, USB, KMI, BLK, EWBC, ASML, CNS, UFPI, and UMPQ.
2108.00 GLOBEX HIGH
Our View: Do you ever shake your head at how this works? It’s about jamming the shorts. I don’t care what anyone says, once the public gets short, the S&Ps and then big investment and mutual funds start buying cash stocks. When they do that, it holds hold up the premiums between the S&P cash and S&P futures for an index arbitrage buy program, and with so many buy stops above the market, the rally becomes a foregone conclusion.
Despite the positive stats that show the S&P cash being up 18 / down 13 of the last 31 occasions, the ESU has rallied 56 handles from its 2052 low, and with Yellen talking today, and knowing she wants higher rates before the end of the year, its quite possible we see some type of sell off. Sell stops start under 2100.00 down to 2086.00. You take it from there…
S&P cash study for the July options expiration
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 9 of 11 markets quoted closed : Shanghai Comp. -3.03%, Hang Seng -0.26%, Nikkei +0.38%
- In Europe out of 12 markets are trading : DAX +0.20%, FTSE +0.27%, CAC +0.20%, MICEX -0.65%, GD.AT CLOSED% at 7:00 am CT
- Fair Value: S&P -6.87, NASDAQ -8.17 , Dow -85.87
- Total Volume: LOW 950k ESU and 3.9k SPU traded
- Economic calendar: MBA Mortgage Applications, PPI-FD, Empire State Mfg Survey, Industrial Production, Atlanta Fed Business Inflation Expectations, Yellen Speaks, EIA Petroleum Status Report, Loretta Mester speaks, Beige Book, John Williams speaks. >
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