The S&P wiped out most of its Monday Flash Crash losses with a big rally back up to the 1990 level… who would have guessed?
Yesterday’s close: S&P 500 up 2.4% at 1987.66. DJIA up 2.3% at 16654.77. Nasdaq Comp up 2.5% at 4812.71. Treasury yields mixed; 10-year declined to 2.168%. Nymex crude oil up 10.3% at $42.56. Gold down 0.2% at $1,122.40 / ounce. The better than expected GDP was a big part of the day.
We knew on last Friday’s close the S&P 500 futures (ESU15:CME) were in trouble but come Sunday night’s Globex session things quickly became unglued. The selloff on Friday had the air of a potential crash and when the futures started pouring lower on Monday and bounced and sold off again .. things could not have looked worse. With the Dow Jones well into bear market territory and the S&P closing in on its first 10% correction in 3 years, 10 months, and 25 days, the ‘great reversal’ had finally come, or did it?
When MrTopStep talks about the S&P doing things that he has never seen, I am also referring to its unending ability to bounce back. Sometimes it can be a cruel game. In the little picture, the 50- to 80-handle pullbacks look big and get the sellers all primed up, but the most recent selloff / flash crash really brought out an extreme level of bearishness, and just like the 50- to 80-handle selloffs, it ended the same way, with a big rip higher.
After seeing how the S&P closed on Wednesday, both Asia and Europe opened sharply higher. Agree or disagree with me, but the S&P pulled the global markets out of what could have been a major reversal for one reason, and one reason only: zero borrowing cost. Zero borrowing cost trumps all other considerations and leaves no better place to invest than stocks. We have maintained that there will be no Federal Reserve rate hike this year, and while that may not give stocks a boost during the current move down, it will eventually play a role in moving the S&P back to new highs later in the year.
MrTopStep Trading Rule: It Takes Days and Weeks to Knock the S&P Down and Only one to Bring it Back… https://mrtopstep.com/mts-trading-rules/
The ESU15 opened the Wednesday evening globex session, and after trading lower during Asia, started to rip higher once Europe came on line. The index broke the 1950.00 area that we had been talking about and pushed buy stops hard into 1965.00 before taking a break into the U.S. open. Once the cash session opened, with the futures up 20 handles, buy programs took over pushing the futures up an additional 24 handles, up to 1987, before noon (Chicago) sell programs started to whack the equities lower dropping them about 43 handles in two hours, down to the prior days high.
Going into the last hour of the day it was a pivotal time for the markets as the final hours have been the tell in recent weeks, and the ESU15 was hovering at the 1950.00 area. The S&P did not disappoint as it ripped higher in the face of the bears and sell programs 45 handles in the final hour, being helped by a buy imbalance of $1.5 billion dollars. Yesterday we noted how Wednesdays market-on-close sell imbalance was the lowest seen in many sessions, and thus an indication that bears could be growing tired, we believe that yesterday’s large buy imbalance seems to suggest that bulls may be ready to re-enter this market.
Overnight the S&P failed to maintain any real rally, and currently at 7:00 CST the futures are down 17 handles, and as much as 22 handles. MrTopStep has always said that after a big Thursday, the next Friday is usually flat to counter trend, and as Friday is the weakest day of the year, we could be seeing just that.
S&P 500 FUTURES TAKE A BEATING BUT KEEP TICKING
The S&P has taken a beating since last week. You can see as the volume picked up but so did the level of MOC selling. One of the things we have constantly written about is how the MOC buying switched to selling on the last trading days of the March or the last trading day of the first quarter.
High Low Close Volume MOC
Monday Aug 17 2100.50 2074.75 2099.25 1,292.404 $720 Mil to Sell
Tuesday Aug 18 2103.75 2090.25 2090.25 1,333,037 $730 Mil to Sell
Wednesday Aug 19 2098.00 2066.50 2072.25 2,287,294 $725 Mil to Sell
Thursday Aug 20 2077.75 2024.50 2025.50 2,577,298 $1.6 Bil to Sell
Friday Aug 21 2029.00 1967.25 1971.50 4,160,367 $2.9 to 3.3 Bil to Sell
Monday Aug 24 1964.75 1831.00 1871.20 5,243,619 $1.6 Bil to Sell
Tuesday Aug 25 1948.50 1860.00 1872.75 3.652.394 $2.9 Bil to Sell
Wednesday Aug 26 1943.00 1850.00 1938.00 3,652,294 $600 Mil to Sell
Thursday Aug 27 1990.25 1944.25 1989.30 2,933,144 $1.5 Bil to Buy
In Asia, 10 out of 11 markets closed higher (Shanghai Comp. +4.82%, up over 10% in two days), and in Europe 8 out 12 of markets are trading lower (DAX -0.65%). Today’s economic calendar includes day two of the Jackson Hole Symposium, Personal Income and Outlays, Consumer Sentiment and earnings from BIG, BNS, and TAX.
S&P 1990 / MrTopStep BootCamp / New Options Trading Room on TAP
Our View: All I can say is … wow! The S&P is a wrecking ball right now destroying the longs and the shorts, but is back at the level the ESU fell apart from last Sunday night. This is not for kids and if you make a wrong move you better get out right away or you’re dead.
If you follow me on Twitter, StockTwits, Yahoo Finance, Investing.com, YouTube, FaceBook, Linkedin, or are part of our mailing list, you know how hard we work. We are not out selling expensive products that don’t work, and we don’t pretend that every day will be a winner but we do have way more winning days in the MrTopStep trading room, and MiM trading room, that you can not see. We also are opening a new MrTopStep Options trading room with real traders, not people trying to run your money. It’s an exciting time at MrTopStep and we want to make sure you are part of it. During the boot camp I will be scaling back my time on Twitter to focus on delivering a non-stop, action packed 5-day boot camp that we may keep open for 10 days. It will be so informative I suggest that you open a Google doc to keep track of what you hear and learn. Start signing up now, do not wait because we are only taking 250 people this time.
Our view is that the S&P tends to go sideways to lower after a big up day. There could be a little more on the upside but I think you have to sell into the early rallies and figure out the second part later.
And always remember to use stops when trading futures and options…
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In Asia 10 out of 11 markets closed closed higher : Shanghai Comp. +4.82%, Hang Seng -1.04%, Nikkei +3.03%
- In Europe 8 out of 12 markets are trading lower (6:30 am CT) : CAC -0.48%, DAX -0.66%, FTSE -0.51% at 6:00 am CT
- Fair Value: S&P -2.68, NASDAQ -2.11 , Dow -19.87
- Total Volume: 2.93mil ESU and 11k SPU traded
- Economic calendar: Jackson Hole Symposium, Personal Income and Outlays, Consumer Sentiment .
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