PPT To The Rescue
No one had this right but the PPT (Plunge Protection Team). Sell the news that Donald Trump won the election? Well, part of that is right, but the best trade was not being short, the best trade was buying the S&P futures (ESZ16:CME) at limit down Tuesday night.
Hillary Clinton had a big machine, and she knew how to use the main stream media and social media to push her platform. She spent millions upon millions in campaign money. On the other hand, Donald Trump stumbled and stumbled, but the stayed with it. He charged from state to state spending his own money and took advantage of a very wounded Hillary Clinton. When President Obama was elected the people of the US were looking for change, and despite his 8 years in office, most of the work he did will be wiped out in the early stages of Trump taking office.
Algo’s Go Crazy: 5.28 million ESZ16 Trade
It was a wild night, and an even wilder day for the S&P 500 futures. After going ‘limit down’ on Globex at 2028.50, the (ESZ16:CME) rallied 90.75 handles,up to 2118.75, on the 8:30 ct futures open. After the open the ESZ rallied up to 2141.75, sold off down to 2121.50, back and filled, and then exploded all the way up to 2166.75, up 21.50 handles on the day, and up 138.75 handles off the globex low.
It was a take no prisoners type trade. If you had a profit and didn’t take it, or use a break even stop, you got run over. The all time record volume high for the CME Group’s S&P 500 e-mini futures was set back in March 2009 at the height of the credit crisis. Over a 6 day period the ES did over 5 million contracts a day, and then topped out at 6.9 million contracts traded in one day. Yesterday total volume was 5.28 million. With all the press conferences and consent election news blasting over all the major television news services, the algorithmic and high frequency trading (HFT) programs went from selling hard to buying hard.
Panic Relief
When the ESZ was going limit down on Tuesday night, not only were people scared, many were panicking. But again, the 5% globex limit stopped the S&P from falling further. Over all my years on the trading floor I have seen a lot of limit downs, and I would say that almost all resulted in the S&P rallying off that limit low. In fact, we think the algos are programed to buy when the ES goes limit down, and once the futures start to trade and offers get pulled, the ‘ladder’ goes from size offers to no offers and all bids.
They say the algos get turned off after the 3:15 futures close. I do not believe that. I think they were responsible for more than 50% of Tuesdays nights 2.15 million contacts traded on Globex before the 8:30 ct open. Most of the industry knows that program, algorithmic, and high frequency trading is responsible for over 65% of the daily volume, and in some cases, up to 75% of the volume. That said when you take the total volume of 5.28 million contracts, and take out 70% from program trading, 1.6 million contracts traded. The 1.6 million that was left of was mix of the big funds buying back their hedges and level after level of buy stops.
6.1% Swing
While there were a few good 10 to 15 handle sell offs, it seemed more designed to catch the retail traders off base, and all of the cash stock buying only added to the squeeze. In terms of the S&P’s overall tone, it was one buy program after another, with a few small pauses in between. As for of the day’s overall volume and trade, it was nonstop action all day.
In the end traders got more than they bargained for. At limit down, the ES was down 5% and ended closing up 1.1%, thats a 6.1% swing in just over 18 hours. The S&P started firming up before his acceptance speech at 2:00 am cst. The trade was like night and day. Almost like the limit down drop never even happened. Trump’s conciliatory victory speech seemed to calm the foreign markets and reassure the US voters that he is ready to take over the White house. There was a lot of talk about replacing Janet Yellen and that the Trump victory means the Fed is less likely to raise interest rates in December.
Putin
The Russian MICEX index rose +2.2%, leading the emerging markets, based on speculation that a Trump win would open the door to better relations and the end of the sanctions imposed on Russia over the invasion of the Ukraine. Everything was moving but flattened out during the day. Gold closed up .20%, oil closed up 1.10%, and the VIX fell 35%. The mexican peso closed at .0502, after being as low as .0479, and the Nikkei fell over 5% in Wednesday’s trade. While some people may not like the election results, there is no doubt that the Trump presidency will make for some great markets for traders.
GLOBEX #Part 1
Overnight global equity markets continued Wall Street’s rally on Wednesday as 21 of 22 major markets in Asia & Europe have been trading higher. The Nikkei, which saw a decline of over 5% on Wednesday, rebounded with a more than 6% rally on Thursday. The S&P futures had continued strength as well. The ESZ traded as low as 2155.50 during globex, and spent a lot of time near that price, but late in the Asian session the ESZ got a lift that continued in the Euro session. The S&P’s rallied up to 2180.50, now 152 handles, or 7.5%, off the limit down lows. The ESZ has since retraced almost 10 handles down to 2171.50, up 11.25 handles on the session, with total volume at 316k as of 6:07 am cst.
In Asia, 11 out of 11 markets closed higher (Nikkei +6.72), and in Europe 10 out of 11 markets are trading higher this morning (DAX +0.93%). Today’s economic reports include the Weekly Bill Settlement, a 52-Week Bill Settlement, Jobless Claims, James Bullard Speaks, Bloomberg Consumer Comfort Index, EIA Natural Gas Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 10-Yr TIPS Announcement, a 30-Yr Bond Auction, a Treasury Budget, a Fed Balance Sheet, and Money Supply.
Brexit Repeat
Our view: Very much like Brexit, the S&P 500 futures (ESZ16:CME) went ‘limit down,’ and then screamed higher after Donald Trump started taking the lead. Yes, there was an eventual retest and new low after Brexit, but just the same, there was a big rally after the Brits decided to leave the EU. The election win for Donald Trump is much bigger in the US than Brexit. Thus, the quick drop, and an even larger pop. While I have never stated who I voted for, I disagree with people protesting in the major cities across the US. Like Donald Trump, or not, he won. He battled a badly broken machine that the American people finally gave up on. Like the first Obama win, the people of the United States were looking for change, and none of us can argue he was the candidate for that. He beat the status quo for a reason, he stayed at it, and he fought for what he thinks is best for the United States. Good or bad, he is our president.
Our view, with the S&P up 152.50 handles off Tuesday nights ‘limit down,’ we lean to selling the early rallies and buying weakness, keeping in mind one of MrTopStep’s trading rule that the S&P tends to go sideways to down after a big up move.
Stanley Druckenmiller
Today Stanley Druckenmiller was on CNBC. Druckenmiller was an x Soros trader before he went off to run his own very successful hedge fund. He is well thought of and respected in the investing world. During today’s interview Druckenmiller offered a different tone with his economic outlook surrounding a Trump administration. He suggests that the prospects for economic growth are greater now under a Republican executive and legislative controlled branch. This is a turn in his tone after Druckenmiller has had concerns over the U.S. economy as of late.
It’s clear that what spooked the markets were banks, such as Citi and Barclays, suggesting there would be a 5-15% decline on a Trump election. They set up a market expectation for such a pull back, but as traders began digesting the election results, the outlook seemed to be a little more optimistic than previously thought. Now the S&P 500 futures are sitting less than 1% from a new all time high, and this morning the December contract came within 5 handles of its contract high.
A lot of what Druckenmiller said was spot on, and part of the reason the S&P has rallied so much in less than two days. We fully suggest you take a look at today’s interview.
See the Stanley Druckenmiller interview here
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 11 out of 11 markets closed higher: Shanghai Comp +1.37%, Hang Seng +1.89%, Nikkei +6.72%
- In Europe 10 out of 11 markets are trading higher: CAC +0.18%, DAX +0.93%, FTSE +0.61% at 6:00am ET
- Fair Value: S&P -3.79, NASDAQ -4.86, Dow -55.74
- Total Volume: 5.28m ESZ and 9.88k SPZ traded
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