With the index markets up so much in 2017, the most recent pattern of selling the gap up opens, or the first rally above the gap, has worked very well over the last few months. Despite the overall low volumes of the U.S. index futures markets, the best trade of the day has been selling the ES when it opens higher on the 8:30 CT futures open. Part of the reason for this is how all the buying power is used up before the open, leaving the ES susceptible to early morning sell offs. Then, the sellers come in and push the futures down, and in come some small sell programs.
No Harm, No Foul
At 1:00pm CT, and after opening at the 2556.00, the ES rallied up to another new all time contract high at 2557.75. After that, it sold off and ‘triple bottomed’ at the 2552.00 level, and then rallied back up to 2554.75, one tick above the vwap. After failing at the vwap, the ES sold back off down to 2550.75, and then rallied back up to 2554.50, two ticks above the vwap, before selling back off down to 2552.75. With the exception of the early selloff, the ES traded in a 5 handle range for most of the day.
Despite the early MiM ( put link in for MiM) showing over $600 million, the Nasdaq 100 futures (NQZ17:CME) held tough just before, and just after, 2:00pm CT. Total volume at 2:10 CT was only 580,000, with 90,000 of that coming from Globex pre-8:30 open, that means only 470,000 ES have traded in 5 hours and 40 minutes. We understand Mondays start out the week slow, but I just do not remember an extended period like this where the ranges and volumes are so small.
While the MiM went to $800 million for sale, the NQ kept ripping higher. At 2:43 it traded 6116.25, up +17.25 points, and the ES traded 2555.25, up +2.75 handles on the day. The MiM ‘flipped’ just before the 2:45 official NYSE Closing Imbalance came out showing: NET Sell $-68 M – 10/16/2017-14:45 CT.
In the end the S&P 500 futures (ESZ17:CME) settled at 2556.25, up +3.50 handles, or +0.13%; the Dow Jones futures (YMZ17:CBT) settled at 22898, up +68 points, or +0.29%; the Nasdaq 100 futures (NQZ17:CME) settled at 6120.25, up +20.50 points, or +0.33%; and the Russell 2000 (RTYZ17:CME) settled at 1505.40, down -0.90 points or -0.05% on the day.
While You Were Sleeping
Overnight, equity markets in Asia traded mixed, with a slight bias to the upside, and were led by the ASX200, which closed up +0.73%. Meanwhile, in Europe, markets are also trading mixed, but with a slight bias to the down side. So far, the big loser in Europe is Copehagens OMXC 20, which is currently down -0.86%.
In the U.S., the S&P 500 futures opened last night’s globex session at 2555.00, and just couldn’t get anything going. I feel like I keep saying the same thing day after day, but it’s true… It was another dull night in the world of e-mini S&P 500 trading, with the ES being held to just a 2.75 handle range. As of 7:15am CT, the last print in the ES is 2556.00, down -0.25 handles, with 69k contracts traded.
In Asia, 7 out of 11 markets closed higher (Shanghai -0.15%), and in Europe 7 out of 12 markets are trading lower this morning (FTSE +0.25%).
Today’s economic includes Import and Export Prices (8:30 AM ET), Industrial Production (9:15 AM ET), Housing Market Index (10:00 AM ET); Earnings — UnitedHealth (5:55 p.m. ET), Johnson & Johnson (6:45 a.m. ET), Morgan Stanley (6:45 a.m. ET), Harley-Davidson (7:00 a.m. ET), Goldman Sachs (7:30 a.m. ET), Canadian Pacific Railway (4:01 p.m. ET), CSX Corp. (4:02 p.m. ET), Lam Research (4:05 p.m. ET), IBM (4:06 p.m. ET) Navient (4:11 p.m. ET).
#ES Back And Fill Until The Spill
Our View: If you are scratching out a few bucks trading the ES, then you are doing pretty good. Being a trader over the last few months has not been easy. That said, there are a lot of 3rd quarter earnings out this week, and with some very big names reporting, we could see a pick up in trade activity.
Today J&J, Goldman and Morgan Stanley report earnings before the bell. As I have been saying, picking tops is a very hard thing to do right now, and while I have been calling for 22548.00 to 2550.00, it’s quite possible the ES goes all the way up to 2580.00 to 2600.00. Not today or next week, but over the long haul.
Our view was right on yesterday, and today’s view is going to be the same; you can sell the gap up opens or the first 2-3 handle rally above the gap, or you can just wait and buy the pullback. What’s hard about this is that most of the rallies happen late in the day, so patience is a virtue.
PitBull: CLZ OSC 15/2 turns down on a close below 50.82; ESZ OSC 15/23 turns up on a close above 2558.39; VIX OSC 2/-1 turns up on a close above 10.20.
Market Vitals for Tuesday 10-17-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets closed higher: Shanghai Comp -0.15%, Hang Seng +0.02%, Nikkei +0.38%
- In Europe 7 out of 12 markets are trading lower: CAC -0.02%, DAX +0.05%, FTSE +0.25%
- Fair Value: S&P -2.07, NASDAQ +2.22, Dow -55.35
- Total Volume: 795k ESZ & 448 SPZ traded in the pit
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