After coming off its best week since last November the S&P 500 futures charged higher during Monday’s trade. At 10:00am CT the total day range was 1932.00 to 1943.00. Trading volume was steady, but the ESH16 got stuck in a narrow trading range the from 1936 to the 1938.50 level for most of the morning, and then popped back up to the highs around the 12:30pm CT, but failed on the 1943.00 area retest. From then on the ESH16 went offered for much of the afternoon trading down to 1935.25 on the 3:15 CT futures close on top of a $600 million to buy MOC order.

The S&P felt like it could top out yesterday, and it did. After the weak close, the ESH16:CME sold off down to 1924.50 on Globex, and at 6:00 am CT is trading 1934.00 with a 1935.25 overnight high. So, is the bottom in? While no one knows for sure, I think the first test would be if the ES holds Friday’s low of 1898.75. The other part of this is if crude oil keeps going higher, the next big test area is the 1975 area. I am still not 100% in the bull camp but I have to admit that it seems like the financial apocalypse of a few weeks ago is residing. While some traders are calling for more downside, others are starting to talk S&P 2300.00. I still think it’s too early in the year to have an extended rally, but that doesn’t mean stocks can’t continue a limited rally. With the constant buying by the mutual funds on the close it’s clear to see new money is being put to work in the stock market.

US stocks traded at a six week high yesterday as commodity prices rallied, but the equity rally failed late in the day. Overnight the People’s Bank of China added to the the weak close by fixing the yuan’s value against the U.S. dollar at a weaker level.The same thing that helped the markets lower in the beginning of 2016. Traders continue to keep an eye on oil but they are also keeping an eye on the world’s central banks and how they plan to respond to one of the worst starts for the global market in many years. Most traders expect the European Central Bank to continue to expand its stimulus measures at its March meeting after a round of weak data. At the same time the US Federal Reserve will have to make up its mind on whether to keep rates unchanged or raise them. While we know that the Fed has had to push back its timetable for raising rates it’s not 100% clear what they will do. Some traders in the US still think a March rate increase is on the table, I don’t think it is, and the Fed Fund Rate futures only price in a 8% chance of a rate increase in March.

In the end, what we can say is the S&P is trying to move higher, the question is can it hold? I am not ready to start talking ES 2300, and I am not in the camp that says the markets will just fall apart, like they have been doing so far in 2016. What I do think is there could be one more shot on the downside before we see a larger rally. Like I said, no one knows for sure what the markets are going to do next, that is why it’s so important to lock in profits when you can.

In Asia, 7 out of 11 markets closed lower (Shanghai Comp -0.81%), and In Europe 9 out of 12 markets are trading lower this morning (DAX -0.75%). Today’s economic calendar includes Redbook, S&P Case-Shiller HPI, Consumer Confidence, Existing Home Sales, Richmond Fed Manufacturing Index, State Street Investor Confidence Index, 4-Week Bill Auction, 2-Yr Note Auction, and Stanley Fischer Speaks.

Our View: As a bull, I should be all over this, but I’m not. When I think about the overall health of the stock market I am just not getting that warm feeling I used to get after a ‘crash and burn.’ I can’t say it’s just one thing I worry about, its many, but the main one is the fed’s mentality of trying to raise interest rates when the rest of the world is lowering. It seems very out of step with what’s going on globally. It feels like the mechanics of what helped the markets higher have been pulled out from under the S&P. That said I am sticking to my guns that this rally will eventually fail. Our view; sell the early rallies and buy weakness with the idea of a downside bias.

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

‘The S&P 500 1943 and Mutual Fund Monday’

• In Asia 7 out of 11 markets closed lower : Shanghai Comp -0.81%, Hang Seng -0.25%, Nikkei -0.37%
• In Europe 9 of 12 markets are trading lower: CAC -0.32%, DAX -0.75%, FTSE -0.46% at 7:00am CT
• Fair Value: S&P -3.16, NASDAQ -1.74, Dow -31.73
• Total Volume: 1.42mil ESH and 6.6k SPH

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