Macro-Market_Profile 2

Mondays have not been a great day for the S&P, but the low volumes made it easy to push the S&P higher yesterday. Last week the Dow Jones futures fell nearly 2.3% and the S&P lost 2.2%. Yesterday the S&P 500 futures (ESM15:CME) rose sharply, rebounding from last week’s losses. Big acquisitions have helped move the markets up over the last two days. First, Warren Buffett’s deal for Kraft Foods (KRFT) to buy Heinz (HNZ) in a deal worth $10 billion and yesterday’s announcement that UnitedHealth Group said it intended to acquire pharmacy benefit manager Catamaran Corp. (CTRX) for $12.8bil and IBM announced it intends to invest $3 billion in the “Internet of Things.” The Dow Jones futures (YMM15:CBT) snapped back 1.5% while the S&P futures (ESM15:CME) and the Nasdaq futures (NQM15) closed up 1.2% accordingly.

The markets have been acting oversold and continued to sell off and close above the psychological 2050.00 level. After selling off down to 2047.25 in Globex Sunday night, the Asian markets closed up across the board with the Shanghai Composite up +2.59%, its largest gain in two months, and 11 out of 12 markets in Europe traded higher. The DAX was firm all night and up over 1.25% early and ended the day up 1.8%.

The first quarter of 2015 earnings season kicks off with Alcoa on April 8. Many investors are concerned that the strength of the dollar will continue to weigh on multinational companies. This has been a big concern over the last few months. According to FactSet, first-quarter earnings of companies in the S&P 500 are expected to decline by 4.7%. What we know is analysts always talk down the S&P 500 earnings before their release and in most cases they come out better than expected. It’s our guess that over the next few weeks as the earnings are announced the S&P 500 will move into all-time new contract highs. But that doesn’t mean they will necessarily stay up, as we think the up and down price action we have been seeing will continue.

In the end, the short week should be bullish for stocks even if there is selling associated with the last trading day of the first quarter. Remember, what they sell today, they will buy back in the first few trading days of the new quarter.

In Asia 7 out of 11 markets closed higher and at 7:00 CT in Europe 9 of 12 markets are trading lower. Today’s eco calendar starts with Kansas City Fed President Esther George’s speech in New York, Redbook, Richmond Fed President Jeffrey Lacker’s speech on the economic outlook, in Richmond, Cleveland Fed President Loretta Mester moderating a panel on the future of banks, at the Atlanta Fed conference in Stone Mountain, Ga., S&P Case-Shiller HPI, Chicago PMI, and consumer confidence.

Our view: Despite not having any ammo left for the close, the mutual funds started to buy back some of the stocks they have been selling over the last two weeks. The rip higher started in Globex Sunday night and followed through on the open and all the way to the close. Every little pullback was bought. At the end of the day the S&P 500 futures are doing exactly what they’ve been doing all year: selling off and rallying. How far will this rally go? I think there’s a good possibility that the S&P will head back toward 2100 or even make a new high, but I don’t think it’s going to take off to the upside. Today is the final trading day of the first quarter of 2015. It’s been a rough start for the spoos this year, and with the expected rate hikes later in the year volatility will remain high. Our view is that the big investment firms in mutual funds may have cash for sale on the close. We’ll be selling rallies and buying weakness with the idea that the S&P is weak early in the day and trends lower; it could remain weak right into the end of the day.

“Mutual Fund Monday and a Big Old End of the Month Short Squeeze”

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

  • In Asia 7 out of 11 markets closed higher: Shanghai Comp -1.02%, Hang Seng +0.18%, Nikkei -1.05%
  • In Europe 9 of 12 markets are trading lower: DAX -0.74%, FTSE -1.14%, MICEX +0.18%, Athens GD.AT +0.53% (at 6:30 CT)
  • Fair value: S&P -8.00 , Nasdaq -7.98 , Dow -89.98
  • Total volume: 1.2mil ESM and 3.9k SPH traded
  • Economic schedule: Esther George speaks, Redbook, Jeffrey Lacker speaks and Loretta Mester from the Fed, S&P Case-Shiller HPI, Chicago PMI, consumer confidence.

[s_static_display]

Tags:

No responses yet

Leave a Reply