Sometimes there are no negatives, sometimes there are only a few, and sometimes there are several. As the stock market moves into the second half of 2015, and the 6th years of the bull market, ‘several’ negatives are starting to weigh down on the US stock market, but it’s not just in the US. After the European creditors came to terms with Greece, China became the hot topic. Like the markets, or don’t like the markets, things are heating back up.
On Wednesday the S&P futures ran all the buy stops from 2096.00 up to 2107.00, and yesterday the ESU15 ran the sell stops going through 2080, down to 2070.00.The Nasdaq futures (NQU15:CME) that led the indices lower, closed down 68.75 points, or -1.62%, to 4502.75. The DOW futures (YMU15:CBT) closed down 100 points, or -0.62%, and the S&P futures (ESU15:CME) fell -0.77% to 2079.50. Leading the markets lower were the media stocks; Viacom Inc. (VIA-13.35%) weighed down on the NASDAQ after the company reported weaker than expected second quarter profits and revenue. Fueling the weakness were concerns that more people are moving away from cable to streaming on the internet. Several other media companies also took big hits (FOXA -14.71%), (DIS -11.14%), and (VIAB -22.82%). The selling in the media sector increased as several large investment firms and hedge funds sold to reduce risk.
DARK SKIES
Going into the 2Q earnings season there was a high level of warnings by Wall Street analyst. Traditionally, many Wall St. analysts lower expectations after big stock market run ups. In most, cases the S&P earnings come out better and the markets move on, but the markets were acting very skittish going into the end of July. The Dow has lost nearly 700 points since July 16th, and is down nearly 900 points from the peak of the market back in May. The PitBull has been warning about the weakness in the Dow Jones Transports, and about the weakness that shows up during the last week of July into the third week of August. Also weighing down on stocks is the continued liquidation in commodities, crude oil futures (CLU15:NYMX ) traded down to $44.28 a barrel. Some are starting to question whether the markets could start to fall like they did during the 2007 Credit Crisis because there are many similarities starting to appear. The Dow fell 700 points from August 1, 2008 to September 1, and is now down 6 days in a row, and down 11 of the last 13 sessions. While I depend on price action and volume when buying and selling the S&P futures, the constant liquidation of commodities, with crude oil hitting multi-month lows, and the non-stop MOC selling on the closes that started at the end of the first quarter, are clearly an indication that institutions, mutual funds, and hedge funds, are dumping stocks. There is no ‘doubt’ the internal are continuing to weaken.
So where are we? It’s starting to feel like this is the beginning of the end to the bull cycle, and today, all eyes will be on the July jobs report. This does not mean I think we are going to crash, nor does it mean we will not go back up, but the warning lights are flashing, and August into the middle of October could spell danger for the S&P and the global markets.
In Asia, 7 out of 10 markets quoted closed lower (Shanghai Comp. +2.26%), and in Europe out 7 of 12 markets are trading modestly lower this morning. Today’s economic schedule starts with the the Employment Situation, Consumer Credit and earnings from GRPN, HSY, CVC, PMC, MGA, BID, HIMX, BR, CST, HRS, BRK.B, NFG, NILE SFUN, WLH, WWAV, and JD.
Our View: The Nasdaq closed down -1.62%, and the S&P closed down -0.77%. Not exactly a crash for the S&P. The bears have come out of the woodwork in the last few days. This morning is the long awaited July jobs report. Goldman Sachs is looking for 235,000 non-farm payroll. The Bloomberg is looking for 223,000, and MrTopStep is looking for 240,000+. If the number does come in higher than expected and the ES gaps up on oversized Globex volume, we lean to selling the open, or the first rally above. If the number comes in shy and the ES sells off sharply on oversize volume, we want to buy the open, or the first dip under the opening range. We also can’t forget MrTopStep’s rule that the ES tends to go sideways to higher after a big down day.
As always, please use protective buy and sell stops when trading futures and options.
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In Asia 7 out of 10 markets closed lower : Shanghai Comp. +2.26%, Hang Seng =0.73%, Nikkei +0.29%
- In Europe 7 out of 12 markets are trading LOWER : CAC -0.32%, DAX -0.38%, FTSE -0.04%, MICEX +0.65%, at 5:30 am CT
- Fair Value: S&P -5.22 , NASDAQ -4.94 , Dow -58.52
- Total Volume: 1.6mil ESU and 4k SPU traded
- Economic calendar: Jobs Friday and Consumer Credit .
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