S&P 500 Futures: The Week Ahead; Mid-Month Rebalance, Two Day Fed Meeting And The December Quadruple Witching

Charts, Commentary, News, Technical Analysis, The Opening Print

Is there a reason to fear the fed’s rate hikes? We don’t think so, but only time will tell…

There has been a lot of upside since the March 2009 S&P 666 credit crisis low.The big question is, with the fed reducing its balance sheet, is the end of the rally near? As of today’s close the Dow futures (YMZ17:CME) are up +17.97%, the S&P 500 futures are up +19.19%, and the Nasdaq futures are up +30.22%.

This is a big week for the futures index markets; its mid-month, the Fed two day rate hike meeting, and the December quad witching expiration. As the fed attempts to scale back its quantitative easing programs and raise rates, we do not think it’s going to be a deal breaker for the ES. The U.S. Federal Reserve has raked up $4,456 billion in quantitative easing. Starting in November it started to work lower, and by December 6th the total was down to $4,437 billion, which is the lowest since September 17, 2014.

See Fed’s Balance sheet at https://www.federalreserve.gov/releases/h41/  

The Fed’s plan is to reduce the balance sheet by $10 billion a month in October, November, and December, and then accelerate the pace every three months until it gets to $50 billion a month, or $600 billion a year. Does this mean the end of the bull market? We don’t think so. While there will be less government liquidity, the Trump tax cut program should be a big positive for the stock market, and so will the administration’s infrastructure programs. Furthermore, the fed has never said it won’t go back to using more quantitative easing if needed.

In the end the the S&P 500 futures (ESH18:CME) settled at 2664.50, up +10.50 handles, or +0.39%; the Dow Jones futures (YMH18:CBT) settled at 24,419, up +83 points, or +0.34%; the Nasdaq 100 futures (NQH18:CME) settled at 6416.00, up +57.50 points, or +0.89%; and the Russell 2000 (RTYH18:CME) settled at 1525.30, up +1.10 points or +0.07% on the day.

As always, please use protective buy and sell stops when trading futures and options.

    • In Asia 6 out of 11 markets closed lower: Shanghai Comp -1.24%, Hang Seng -0.59%, Nikkei -0.32%
    • In Europe 11 out of 12 markets are trading higher: CAC +0.41%, DAX +0.13%, FTSE +0.28%
    • Fair Value: S&P +3.03, NASDAQ +21.20, Dow +17.61
    • Total Volume: 1.6m ESH & 11.7k SPH traded in the pit


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Danny Riley (2810 Posts)

Danny Riley has worked in the futures and options industry for 38 years, including the CBOT’s bond room, where he worked for several of the Market Wizards. He went on to build the largest volume desk in the S&P 500 Index Futures, serving some of the largest banks and hedge funds, the UBS program trading business, and some of the world's top individual traders. As a leader and co-creator of the MrTopStep IM-Pro Trading Room, he shares trading ideas and breaking market news live from the floor with our other professional traders and new traders eager to experience the power of collective intelligence. Join us today and get the edge only social trading can give you.

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