S&P Up Rebalance; MOC Sell $1.8bil, Rats Jump Ship

Yesterday the S&P 500 futures attempted to close higher for the third day in a row, but there was a dark cloud hanging over the S&P late in the day and it was called the first quarter S&P 500 rebalance.

I have been warning people about the end of the 1st quarter rebalance for over two weeks, CNBC started talking about it last Friday. I tried to keep it on everyone’s radar and continued to talk about it right up to the event itself.

We are not going to go to through all of the hoopla of the day’s ups and downs. The S&P 500 (ESM15:CME) opened lower, rallied in the morning, made a high at 2076.00 midday and at 2 o’clock central time when the MiM turned on showing over $400mil to sell we knew we were in for a hell of a ride. Literally in a matter of seconds the S&P went from a sideways to higher chop to a gigantic sell program. The chart above shows where the S&P futures (ESM15:CME) made their high and then started to back off. It was a vicious selloff that seemed to catch most people off guard. The chart below shows how the futures sold off as the MiM continued to show larger amounts of MOC (market on close) selling on the NYSE.

The chart above is the MrTopStep Imbalance Meter(MiM). When the readings started showing big for sale after 2:00 CT, the S&P futures started to fall, but as the MiM increased to the sell side the futures fell nearly 20 handles. A recent study by one of our MiM members (mimsters) suggests that shorts on the MiM with these large imbalances should be held into the close, and that really paid off. Yesterday was the last day for our MiM special, but we are slow getting things down and off the site, I am pretty sure this link works:

https://tradechat.me:8080/co/mim-m5

Today is the last day for 50% off your first month, the offer will be valid for the rest of the day.  

The chart above is a MarketDelta S&P 500 futures imbalance (ESM15:CME) chart showing how the futures fell as the MiM dropped. It’s a great trading tool especially when it’s the end of the month or end of the quarter when there is a lot of volume trading. MrTopStep’s MiM room more than paid for itself yesterday! It’s exciting stuff and I am glad MrTopStep can offer such a tool.

In Asia 6 out of 11 markets closed lower and at 7:00 CT in Europe 11 of 12 markets are trading higher this morning . Today’s eco calendar starts with John Williams and Dennis Lockhart from the Fed speaking, motor vehicle sales, ADP employment costs, Gallup US Job Creation Index, PMI Manufacturing Index, ISM Mfg Index, construction spending and the EIA petroleum status report.

Our view: Around 8:00 CT the ESM15 “fell apart” when world powers said they would walk away from the nuclear negotiations (Wednesday) if Iran could not come to a deal. Needless to say it was a very volatile afternoon and evening session. Last night the ESM were up a little from the close and out of nowhere the ESM15 sold off nearly 30 handles and bounced back up to the 2060.00 area and traded back down to 2051.00 this morning.

I have tried to say that there’s something wrong. I’d stayed away from being overly bullish because of how the S&P kept hanging around the 2050.00 level and could not seem to hold any rallies. As I always say, I’m bullish but I’m not foolish. Today and tomorrow there are a ton of economic releases. I get the feeling the selloff is not over yet. Our view is to buy the early weakness and sell the rallies while at the same time remembering that the mutual funds will have money to put to work at some point in the next few days.

“S&P Up Rebalance; Rats Jump Ship”

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 +1.66%, Hang Seng +0.73%, Nikkei -0.90%
• In Europe 11 of 12 markets are trading higher: DAX +0.87%, FTSE +0.72%, MICEX +2.14%, Athens GD.AT -0.51% (at 6:30 CT)
• Fair Value: S&P -7.93 , Nasdaq -8.37 , Dow -88.88
• Total Volume: 1.59mil ESM and 7.8k SPH traded
• Economic schedule: John Williams and Dennis Lockhart from the Fed speaking, Motor Vehicle Sales, ADP Employment Cost, Gallup US Job Creation Index, PMI Manufacturing Index, ISM Mfg Index, Construction Spending, EIA Petroleum Status Report.

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