S&P 500 Futures; Monday’s Flunk In Time For PitBull

Going into yesterday the S&P 500 futures appeared to be firm after rallying to close 37.25 handles higher on Friday. During the globex session, the futures rose 7 handles to 1995.50, in the early European trade, before turning lower into the cash open and commencing to drop down to the 2065 area by midday. The ESZ sold off by more than 30 handles from the globex high, but it did rally in the final hour to close at 2081.25, only down 7.25 handles.

Overnight, after the economic data releases in China came out as a miss, the equity markets in Asia began to sell lower, taking the worldwide indexes down with them, as the S&P futures drifted back to yesterday’s low. The S&P is currently resting in the 2065.00 area at 6:00 am CT.

Let’s face it – while we have highlighted the higher lows, the charts still do not look great, as the S&P futures are placing lower highs. The 2095 area that we mentioned as being a pivotal resistance area last week continued to show signs of trouble yesterday. Meanwhile, a wedge of sorts is forming from these higher lows and lower highs that is about to pinch in one direction or another. Given the technical situation, combined with the Fed’s interest rate decision next week, and the seasonal “Santa” rally, there are plenty of potential market movers.

We were not necessarily surprised by the weakness yesterday. In the morning report I gave on the radio show, I began to call out another one of those trading rules I have used for years, coming from the PitBull Marty Schwartz himself. This rule suggests that the markets will be weakening into the Thursday or Friday the week before option expiration, but will typically find a low there and rally into the following week’s close. This has been one of the most useful rules we use. This also coincides with the historic tendency that December has to bottom around the 10th trading day of the month, which will be Monday of next week. Lastly, worth noting is that December typically experiences around a 3.5% draw down early in the month, and the small pullback last week qualifies as meeting the historic average area.

S&P 500: Up a Day, Down a Day

In the world of trading the S&P, the best way to describe what the index has been doing is by looking at the cash (^GSPC:SNP), as only once in the last 16 sessions has the index made consecutive daily closes in the same direction. MrTopStep calls this “Up a day, down a day.’’ This type of price action makes it hard to be bearish or bullish; but at the end of the day, the ESZ15 has made several ‘higher lows.’

1831.00 “Panic Low” – Monday August 24th

1861.00  August Retest – September 29th

1998.50 Paris Terror – November 16th

2040.50 Pre-NFP Low- – December 3rd  

In Asia, 11 out of 11 markets closed lower (Shanghai Comp -1.89%), and in Europe 11 out of 12 markets are trading lower (DAX -1.03%). Today’s economic calendar includes the NFIB Small Business Optimism Index, Redbook, JOLTS, 4-Week Bill Auction, 52-Week Bill Auction, and a 3-Yr Note Auction.

Our View: MrTopStep is sticking with the year-end rally call, although it’s becoming difficult to maintain. However, the key to this hinges on three items: 1.) The S&P has to maintain its higher lows; a break of last week’s low puts the index in danger; 2.) The 2095 resistance currently in the futures has to be converted into support; which in turn would lead to 3.) a close above 2100, followed by a run on buy stops above 2105, which would give the index much ammunition.

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

• In Asia 11 out of 11 markets closed lower : Shanghai Comp. -1.89%, Hang Seng -1.34%, Nikkei -1.04%
• In Europe 11 of 12 markets are trading higher : CAC -0.83%, DAX -1.03%, FTSE -.71% at 6:00am CT
• Fair Value: S&P -1.13 , NASDAQ -1.00 , Dow -7.47
• Total Volume: 1.7mil ESZ and 7.4k SPZ

[s_static_display]