The summer rally continued yesterday with both the S&P 500 futures (ESU17:CME) and the Nasdaq 100 futures (NQU17:CME) closing higher for the 10th day in a row. While some traders continue looking for a ‘top’, the sting from trying to pick one has has been painful.
Leading the way were the tech stocks, which broke a nearly two-decade-old record this week. According to FactSet, the S&P 500 tech sector is trading at 23.2 times the past 12 months’ earnings. While that is above the 22 times at which the broader S&P benchmark is trading, it’s far below the 70.3 times the prior 12 months of earnings on March 27, 2000, at the height of the 2000 tech bubble.
Buy Fest Continues
As for yesterday’s index trade, the S&P 500 futures (ESU17:CME) traded up to a new all time contract high at 2476.50 on Globex, pulled back down to 2465.50 after the 8:30 CT futures open when a headline hit saying that special counsel Mueller was expanding the Russian probe into Trump business transactions, as well as business dealings of Trump associates.
The Nasdaq 100 futures (NQU17:CME) that made an early high at 5933.50, sold off down to 5896.75 at 9:40 CT, and then traded all the way up to a new all time contract high at 5930.75 just before 11:30. Most of the movement was centered on the continued strength of the tech sector. With the VIX trading at a 24 year low, there seems to be little to no fear.
Late in the day, the MiM started to show over $500 million to buy, and the actual imbalance came out BUY $540 million. Both markets pulled back slightly, but popped a little after Microsoft Q2 ‘17 Earnings Results beat expectations, and then sold off slightly going into the 3:15 futures close.
While You Were Sleeping
Overnight, equity markets in Asia traded mostly lower, led by the ASX 200, which closed down -0.67%. In Europe, all major markets are currently trading lower, as the euro continues to strengthen, and earnings continue to unravel.
In the U.S., the S&P 500 futures opened the globex session at 2472.50, and traded in a 2 handle range for most of the night. As Asian markets were closing, and European markets were opening, U.S. stocks finally saw some movement. Just after 4:00am CT, the ES rallied to a new high at 2475.25, and then began gradually trading lower.
By 5:45am, a new low was made at 2469.25, extending the overnight range to 6 handles. As of 6:45am, the last print in the ESU is 2471.50, up +0.25 handles, with 106k contracts traded.
In Asia, 8 out of 11 markets closed lower (Shanghai -0.21%), and in Europe 12 out of 12 markets are trading lower this morning (FTSE -0.10%). Today’s economic calendar is light, and only includes the Baker-Hughes Rig Count.
Our View
Including the 24 hour overnight chart, the biggest pullbacks this week were Tuesday’s 12.50 handle drop from the overnight high, and yesterday’s 10.25 handle drop from the Globex high. If you have been waiting for 10 handle pullbacks, then you have only had two to catch all week.
After yesterday’s early low, the bounce couldn’t meet the overnight high, and this morning’s rally fell short of yesterday’s Globex high by a handle. There appears to be some very light (at this point) resistance forming just above 2475, that leads to a move of 2469.25.
With the S&P up 9 of the last 10 days, and then yesterday’s new all time high, sell off and then close back near the prior settlement, it looks like the current move is beginning to be exhausted, and there may be some profit taking today.
Our view is simple; if the S&P is trading above the 8:30am CT opening print, we want to be long. Today’s calendar today quiet, and the summer is halfway over, so traders could head to the door after a quiet morning, leaving the S&P open to a “late Friday RIP”.
However, if the S&P’s lose the open, and are unable to recover, then we think today could be a day of profit taking.
PitBull: CLU osc 19/12 turns down on a close below 4722; ESU osc 33/7 turns up on a close above 2475.41; VIX osc -12/-3 turns down on a close below 9.17.
Market Vitals for Friday 07-21-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed lower: Shanghai Comp -0.21%, Hang Seng -0.13%, Nikkei -0.22%
- In Europe 12 out of 12 markets are trading lower: CAC -0.66%, DAX -0.74%, FTSE -0.10%
- Fair Value: S&P -2.52, NASDAQ +0.92, Dow -51.22
- Total Volume: 1.1mil ESU, and 600 SPU traded in the pit
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