Most of yesterday’s action occurred before the opening bell. The S&P 500 futures pushed lower in globex after comments from Chinese leaders cast doubt on Trump’s ability to work with them. As British Prime Minister Theresa May was beginning to make comments to British Parliament, the S&P’s pushed down to a 2257.50 globex low before rallying into the cash open, as her comments suggested more of a soft Brexit.
On the 8:30 am cst open the ESH17:CME printed 2262.50, down 9.75 handles, and looked weak as it moved down to 2259.75. There was a rebound up to a first hour high at 2267.25, and then the futures traded sideways for most of the day, before dumping again in the last 90 minutes. The move lower took out the globex low by a tick, at 2257.25, and from there the 10 handle rule went into effect as the futures rallied into the close, settling at 2262.50, right where they opened.
All in all, the day was another painful grind to nowhere as onces again the S&P futures closed in the 2260-2270 area. The water in the bathtub continues to splashed on both sides. The tell of the tape yesterday was that when the equity futures looked like it was a good time to sell, it was actually the right time to buy, and when they looked like it was time to buy, it was the ideal time to sell.
While You Were Sleeping
Overnight equity markets in Asia were mixed and mostly quiet, meanwhile, Europe opened with with a slight lean to the downside. The S&P’s rallied to a high of 2268.50 overnight, and once again found resistance there. Since the high was made late in the Asian session, the ESH has slowly backed off down to 2263.00, just a handle above the globex open, with volume of 78k as of 5:50 am cst.
In Asia, 6 out of 11 markets closed higher (Nikkei +0.43%), and in Europe 7 out of 11 markets are trading lower this morning (DAX -0.07%). Today’s economic calendar includes Bank Reserve Settlement, MBA Mortgage Applications, Consumer Price Index, Redbook, Industrial Production, Housing Market Index, Kashkari Speaks, Beige Book, Janet Yellen Speaks, and Treasury International Capital.
Today’s Calendar Preview from Barclays:
Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Federal Reserve President Kashkari speaks on the economy.
Fed Chair Yellen (FOMC voter) speaks: Federal Reserve Chair Yellen will participate in a discussion on the state of the economy in San Francisco. Chair Yellen has been upbeat on the economy recently. We continue to look for clarification on what she expects from fiscal policy this year, how she views the effectiveness of such policy, and the likely Fed response to that policy.
*Times reported are local NY time.
Our View:
The S&P’s are still stuck in the 2260-2270 range. Bulls are looking to build a floor at 2270, and bears are looking to build a ceiling at 2260. This chop has lasted longer than I anticipated, and it can probably go on longer than anyone thinks. With the options expiration, Fed speakers, and Trump’s Inauguration this week, it seems that something has got to give. With the S&P’s hanging 10-20 handles from new all time highs everyday, and holding their ground, the advantage has to go to bulls, but I can’t rule out a pullback. For now, it comes down to who can move the S&P out of the range, for more than a day.
Our call is to sell the rallies at the 2270 area and above, and/or look to buy weakness around 2260.00. As much as I don’t like it, it’s the only way to trade this market as long as we are in this range.
Download all of the January expiration stats here.
Market Vitals for Wednesday 01-18-2017
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Top Notch Trading Morning Bond Report
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets are trading higher: Shanghai Comp +0.14%, Hang Seng +1.13%, Nikkei +0.43%
- In Europe 7 out of 11 markets are trading lower: CAC -0.40%, DAX +0.07%, FTSE +0.07% at 6:00am ET
- Fair Value: S&P -5.13, NASDAQ -4.44, Dow -70.17
- Total Volume: 1.5m ESH and 4.0k SPH traded
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