Heading into the second day of the Federal Reserve’s two day meeting the S&P futures (ESZ.15:CME) had closed higher 5 out of the last 7 trading days. During the post-FOMC release the S&P futures started to get ‘bid up’, running higher in the afternoon, trading all the way up to the 2012.00 level. The buy programs took out all the buy stops that we had mentioned from 1991.50 all the way up to 2004, and all the way up to the high of the day. All this after Janet Yellen said there would be no rate hike during the September Federal Reserve meeting. Things could not have looked better until the MrTopStep Imbalance Meter (MiM) started to show some big selling lining up on the close.
MiM / S&P KILL JOB
(Learn more about the MiM here)
Like I have been saying, there are several factors, and many moving parts right now to consider. Over the last 8 days the ESZ15 rallied more than 90 points going from a low at the 1920.00 area last Thursday, to yesterday’s high of 2011.75, thats a total of 91.75 positive points. After yesterday’s no Fed interest rate hike announcement the ESZ15.CME ‘pop’, the futures sold off all the way down to a new daily low at 1973.00, a 41.75 point drop in less than 2 hours, and all the way down to 1954.50 at 6:30 am CT this morning, making for a 56.75 handle drop in 17 hours. After the ESZ made its high it sold off and then had one last rally up to the 2007 level when I put this out in the MrTopStep forum and Twitter. The results of the blast were shocking and caught the longs with their pants down:
At 2:59 the ESZ was trading at 2005.00 just moment from it’s 2011.75 high, and I posted this in the MTS room and on the ICE Chat:
ICEchat ( 2:59:10 PM ): (driley) MiM showing 1.1bil for sale/ run the buy stops / squeeze everyone out and then sell right into it
The Market-Imbalance-Meter (MiM) was showing a strong imbalance to sell very early on as the futures were making the high and it felt as though everyone was too long and the S&P’s had run up too quickly. What we got was within 5 minutes of my post the futures began to sell off from the 2005.00 level all the way down to 1972.00 in the final hour of trade. It’s the old game of run the buy stops, get everyone long then reverse and run the sell stops.
FAR FROM OVER
There are 11 trading days left in September and 22 trading days in October. Additionally, there is a very active economic calendar in the final two weeks of September. 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. The other part of this is the week after the September Quadruple Witching is down. In the end, we still maintain that the S&P is going to continue to be volatile. History tells us that the end of July to the middle of October have seen some big drops, but history also tells us that while October is known for its crashes, it’s also known as the ‘bear killer’. While the markets may be going down right now it’s always important to have a forward looking view.
In Asia, 8 out of 11 markets closed higher (Shanghai Comp. +0.38% ) , and in Europe 10 out of 12 markets are trading sharply lower (DAX -2.68%) this morning. Today’s economic calendar starts with the Quadruple Witching, Leading Indicators and a 10 Yr-TIPS Auction.
Our View: You gotta love it, rip, rip, rip, dip. Ok, it’s time to put the Fed in the back seat. Yellen & Company know there is no way they can hike interest rates right now, and there isn’t just one reason for it, there are many. Some were upset that the fed did not raise, but at the end of the day the timing has to be correct, and with China acting up and inflation picking up it just is not the time. So, it’s on to the next and the next is today’s September Quad witching and then the end of the 3rd quarter rebalance and into the ‘Spooky’ month of October. Is it over? not by a long shot. Our view is with the roll and the Fed out of the way volume is going to drop. Our view is to sell the early rallies and buy weakness, keeping in mind how far the ES has rallied.
MrTopStep Radio Show today at 7:55am and 11:55am CT
- In Asia 8 out of 11 markets closed higher : Shanghai Comp. +0.38%, Hang Seng +0.30%, Nikkei -1.96%
- In Europe 10 out of 12 markets are trading lower : CAC -2.41%, DAX -2.76%, FTSE -1.31% at 6:00 am CT
- Fair Value: S&P -10.28 , NASDAQ -13.43 , Dow -107.07
- Total Volume: 2.3mil ESZ and 6k SPZ
- Economic calendar : Quadruple Witching, Leading Indicators, 10 Yr-TIPS Auction.
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