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At the Chicago close, the S&P 500 futures (ESZ15:CME) was down -0.19% at 1968.00. The Dow Jones futures (YMZ15:CBT) closed down 7 points, or -0.14%. The Nasdaq 100 futures (NQZ15:CME) closed down -0.15% at 4289.50. Crude oil on the NYMEX (CLX15:NYM) closed up 1%, and gold futures (GCX5) closed up 0.80%.

Yesterday, the S&P 500 futures rallied back toward its September highs and began to fail, while the +1% move in crude oil futures offered little help to the equity futures. Adding to the days weakness, was the IMF cutting its outlook for the global economy in 2015 and weakness in the biotech and healthcare sectors. Yesterday’s overall trade was a good example of a market that was overextended and overbought. Despite all the negatives, the S&P closed down fractionally, just off of it’s early lows. As of this morning, the S&P 500 futures have closed higher 5 of the last 6 trading days, and it’s looking positive so far this morning. During this time we have seen the S&P futures rally as much as 125 points from last weeks low.

The third-quarter earnings season kicks off tomorrow when Alco (A) releases its third-quarter earnings after the close. According to Factset, Alcoa physics are expected to show a contraction of 5.2%, and that is after the company slipped into negative territory in the second quarter, for the first time since the third quarter of 2012. As traders gear up for the earnings season, analysts are again pointing to lower earnings. A big part of the weaker earnings growth is due to the energy sector. Adding to the overall dark cloud of the third-quarter earnings was last Friday’s weaker than expected jobs report.

Several traders we spoke to think that the markets may be starting to move past the weakness we have seen over the last few months, but the historical statistics we follow indicate that the beginning of the month is firm, and then weakness occurs mid month. October is known for some very big ups and downs, and we don’t expect anything less this month. As we have said many times, the markets must get past the middle to the third week of October. We have seen the S&P rally many times going into the end of September and the first trading days of October only to see a big reversal back down. While we are not saying this is going to happen we also can’t rule it out. The VIX briefly broke 19.00 yesterday, that’s down from 25.67 on September 30th. I’m personally not ready to say the decline is over, but the way the S&P is operating right now, anything is possible. In the end I’m going to reiterate what I’ve been saying for months…the S&P will get past the current turbulence, and start to go back up, as October comes to an end and the best six months for stocks begin (November to April). I do not think there’s going to be a larger letdown, but I cannot rule out further pullbacks. I am also still looking for a long S&P 500 call option play for year end.

In Asia, 9 out of 10 markets closed (Hang Seng +3.13%), and in Europe 10 out of 12 markets are trading higher this morning. Today’s economic calendar starts with the MBA Mortgage Applications, Gallup Job Creation Index, EIA Petroleum Status Report, a 10-Yr Note Auction, and Consumer Credit.

Our View: I know people want to go fast when trading the S&P, but that’s not my style. The way I see it is, the longer you have your wallet sitting out, the more likely your cash will be missing. Like I said to the PitBull ‘there are just too many decisions to make’ so I am taking a step back from looking at every tick. I have an idea of what I think the ES is going to do, but its gets clouded up by all the programs. Our view is to sell the early rallies and by weakness. Below is a link to the S&P cash study for the October expiration.

See All Of The October Expiration Stats Here…

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

 

    • In Asia 9 out of 10 markets closed higher : Shanghai Comp. CLOSED, Hang Seng +3.13%, Nikkei +0.75%
    • In Europe 10 out of 12 markets are trading higher : CAC +0.69%, DAX +1.04%, FTSE +0.51% at 6:00 am CT
    • Fair Value: S&P -8.55. , NASDAQ -12.80 , Dow -100.13.
    • Total Volume: 1.6mil ESZ and 4.9k SPZ

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