Mondays abbreviated holiday electronic trading session saw the S&P futures (ESH16:CME) trade up to a daily high of 1890.00, a daily low at 1865.00, and a settlement at 1885.25, up 27.00 handles on the day. At 8:00pm CT Monday night the ESH traded up to 1892.00 and then sold off down to 1885.75. Volume was extremely low throughout both sessions. It was very clear to see that many of the big investment and trading firms were not trading yesterday, but with the Russian’s in Doha trying to get OPEC members to agree on production cuts, over 20 economic releases, 6 federal reserve bank presidents speaking, a lot of housing numbers, and the February options expiration this week the markets staying quiet will not be an ‘option’.
Traders can describe the current rally in the S&P however they like, but the bottom line is, the low was headline driven and backed by one of MrTopStep’s favorite trading rules; “thin to win”. One of the things we have learned is that the markets react to long weekends. From Thursday’s 1802.25 low, to last night’s/this morning’s high, the ESH16 has rallied 88.25 handles in a total of 40 trading hours. Overnight the ESH fell about 15 handles from its high down to 1878.00 while gold futures (GCH6:CMX), which were down almost $50.00, have rebounded from the lows and are currently trading at $1,1212.00. Also the dollar/yen pair (USD/JPY) pared gains overnight and is last traded at 113.695 from a high of 114.878 earlier in the session.
In Asia 10 out of 11 markets closed higher (Nikkei +0.20%), and In Europe 10 out of 12 markets are trading higher this morning (DAX -0.50% at 6:00 am CT). This week’s economic calendar includes 20 economic reports, 4 Treasury settlements, 6 Treasury announcements, 4 Treasury auctions, and 6 Fed speakers. Today’s economic calendar includes a 3-Yr Note Settlement, 10-Yr Note Settlement, 30-Yr Bond Settlement, Empire State Mfg Survey, Patrick Harker Speaks, Housing Market Index, Neel Kashkari Speaks, 4-Week Bill Announcement, 3-Month Bill Auction, 6-Month Bill Auction, Treasury International Capital, and Eric Rosengren Speaks.
Our View: VIX were down to $25.32 Friday and the bonds sold off down to 165.06 Monday. A lot of risk on / risk off trading going on but, you know what? Despite the selling the mutual funds have been buying cash on the close (MOC buying) every day since the last trading day of January. At some point that is going to catch up with the stock market. and with China not getting killed and the Nikkei ripping higher. it feels like its risk on. As I have always said, I am a bull but I still think it’s too early in the year to see a sustained rally. Our view; sell the early rallies and buy weakness. Sure the ES can keep going up but that doesn’t mean it can’t reverse lower either.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 10 out of 11 markets closed higher: Shanghai Comp +3.29%, Hang Seng +1.08%, Nikkei +0.20%
- In Europe 10 of 12 markets are trading higher: CAC +0.42%, DAX -0.50%, FTSE +0.54% at 6:00am CT
- Fair Value: S&P -3.73, NASDAQ -1.70, Dow -40.53
- Total Volume: 2mil ESH and 4.3k SPH
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