There are few jobs like being a futures and options trader. Sure, trading stocks and bonds can be a profitable way to make a living but there is nothing like selling crude oil futures and watching it drop $2.50 in three hours, or buying the S&P after a big algorithmic news sell program, catching a falling knife and watching it rally 30 or 50 handles in one day. Or watching a cheap S&P call you bought go up 30 times its value. It is what futures traders live and die for.
EXPANSION OF THE RANGE
On Friday the ESM15:CME broke through more of the buy stops we have been pointing out, and made another new all-time contract high at 2122.75 in Globex, and 2120.50 on the day session. As the first quarter of 2015’s earnings season winds down, overall earnings did not fall as much as Wall Street forecasts. I believe that the most recent German bund / S&P sell off, a slightly better than expected earnings season, and the short squeeze in the S&P going into the May options expiration, all played its role during the most recent push up. At the end of Friday’s session the ESM15 closed up 1.3 points or +0.1%, the Nasdaq (NQM15:CME) closed down 1.5 points or less than -0.1% and the Dow futures YMM15 rose 27 points or +0.1%. Friday’s trade was exactly what we called for, a new high, following one of MrTopStep’s trading rules that the “S&P tends to go sideways to lower after a big up day.” I understand that many traders have a technical approach to trading but I also think it’s important to have to have a “feeling” for the direction. Over the last few weeks we feel we have done a good job of providing that “feel.” If you don’t have the right direction the levels really won’t matter.
2015 The Year of the Grinder
After all the huffing and puffing, the S&P closed up +0.30%, and is now up +3.1% YTD. The Dow Jones (YMM15:CBT) closed up +0.4%, and is less than 1% off its all time contract high made on March 2 record close. The NASDAQ Composite is up 6.59% YTD. It’s our guess that the risk in the S&P is still on the upside, and helping accommodate that is the historically low volume of the stock markets as a whole. Is the S&P going to take off to the upside? I don’t think so but I do think there will be another leg up before any real pull back. As volume continues to drop, and the S&P at new highs, VIX is not much of a concern right now, but we do not think that will stay that way all summer. The old adage about selling in May and walking away could turn into “Take some profit in May and get ready to pray.”
In Asia 7 out of 11 markets quoted closed higher, and in Europe 6 out of 12 markets quoted are trading higher this morning. There is a low level of economic and earnings reports scheduled this week. There are only 14 economic releases, 11 T-bill or T-bond auctions or announcments, 4 Federal Reserve Bank presidents speaking, the FOMC Minutes and Janet Yellen speaking on Friday. Today’s economic and earnings scheduled starts with the Housing Market Index and Chicago Federal Reserve Bank President Charles Evans speech at Swedbank conference in Stockholm and earnings from URBN, JASO, TTWO, A, CUB, RLGT, ASND, DWSN, WPC, LF, OFIX, NOAH, CCSC, MOMO, BLRX, ESLT, LAKE, and CCIH.
New Highs and No Volume
Our View: As the ESM15 expanded its downside range, it is now in the process of expanding the upside range. Money moving back into stocks, an uninvested public, and the S&P regaining its footing as the No.1 stock index in the world. Is the game fixed? Not if you stay the with the overall pattern of selling off and making new highs. While the new highs may not be as frequent, Friday marked the 8th new contract high of the year. We see higher prices, but I’m not ready to call for any sizable pull backs yet. Volume is just too low and there are still more upside buy stops to run.
- In Asia 7 of 10 markets closed higher : Shanghai Comp. -0.58%, Hang Seng -0.83%, Nikkei +0.80%
- In Europe 6 out of 12 markets are trading higher: DAX +0.37%, FTSE +0.06%, MICEX -0.35% , GD.AT -1.33% at 5:30 CT
- Fair Value: S&P -3.49 , Nasdaq -3.80 , DOW -36.70
- Total Volume: 1mil ESM and 4k SPM traded
- Economic calendar: Housing Market Index and Chicago Federal Reserve Bank President Charles Evans speaks, 6 -Month T-bill Auction .
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