The bears have owned the tape over the last few months and for good reason. China was melting down and the Federal Reserve was going to raise interest rates for the first time since 2006. Six years into the bull market run, and with the S&P up over 200%, the stock market started to seize up, and as fear built up, so did the short positions.
Its 2:24 PM CT and the S&P futures are trading 1976.00, up a shocking 34.5 points. The S&P futures (ESZ15:CME) have closed higher 5 consecutive sessions, and is currently up 5.6%, its largest increase since December 2011. The S&P is currently 6.7% off its all-time high set back in May. The Nasdaq futures (NQZ15:CME) are up 58.50 points at 4319, and the Dow Jones futures (YMZ15:CBT) are trading 16645, +268 points, and closed -8.4% off its record high made in May. In one of the largest U-turns in a long time, the S&P caught everyone short into the decline last week, but when the imbalances started showing buys at the end of the quarter, and MOC (market-on-close) buys into the first trading days the new quarter, it caught most people off-sides. It’s now 2:33 PM and the ESZ15 just traded 1979.00, up 36 points. The index futures have climbed higher all day with only a few minor pull backs.
MrTopStep Trading Rule: It Takes Days and Weeks to Knock the S&P Down and Only One to Bring it Back
I am going to be honest, I clearly thought the S&P would pull back yesterday, and I made my call one sided: to sell rallies. I took my own advice and got run over 2 out of 3 attempts, and after pushing back from the screens I could see there was an all-day buy program going on. Meaning that the big investment firms were either covering shorts or putting new money to work. There was a story out last week that many of the big hedge funds and prop trading firms had ‘lifted’ their hedges / protection. I thought that could end up a negative, but that’s not the case. Right now the S&P is making good of the bad news and taking last Friday’s 142,000 non-farm payroll as another solid reason the Federal Reserve cannot raise rates in 2015, keeping rates low and pushing the public back in to buy stocks. Is the rally over? No, but I think it’s close.
In Asia, 9 out of 10 markets closed higher (Hang Seng -0.10% ), and in Europe 8 out of 12 markets are trading higher this morning. Today’s economic calendar starts with the International Trade numbers, Gallup US ECI, Redbook, Kansas City Federal Reserve Bank President Esther George speech on the payments system, in Chicago, 3-Yr Note Auction, Treasury STRIPS, and San Francisco Federal Reserve Bank John Williams outlook speech, in San Francisco.
S&P 500 BlowOut Sale
Our View: As a trader, and as a person, it’s important to be honest with yourself. Over the last few weeks I have ‘not’ had a good feel for the markets. The sharp swings up and down have caught me offsides a few times lately, and I do not like it at all, but I also think it’s all part of the increased volatility. If you’re not willing to shuffle your feet, you better take a step back. The PitBull taught me a long time ago that when your timing is off to take a step back. That doesn’t mean I will not be trading, but I will be doing it much more selectively.
So far, the first three days of the new quarter have been all buys, and it has sent the futures as high as 119 handles in just a week, but now leaves it at the top of the 6-week range exactly where resistance has been. Furthermore, the October historical calendar shows strength in the early and latter part of the month, but mid-month is typically where the weakness comes in and the lows are found. While I am looking for an October rally to maintain into the years end, I’m not forgetting that typically October remains volatile through month’s end.
View 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 -0.10%, Nikkei +1.00%
- In Europe 8 out of 12 markets are trading higher : CAC +0.29%, DAX +0.25%, FTSE -0.07% at 6:00 am CT
- Fair Value: S&P -9.55 , NASDAQ -12.38 , Dow -107.77
- Total Volume: 1.67mil ESZ and 6k SPZ
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