We knew there was going to be a big drop in the May non farm payroll number due to over 40k people out of work because of the Verizon (VZ ) strike, and when the 7:30 CT number was released showing only 38,000 jobs created, the S&P futures dropped, and then dropped again after the 8:30 futures open. The number sent shock waves all over the place, but the two places it really showed up in were the Japanese Yen, which rallied 2.1%, and the CBOT’s 30 year bond futures (ZBU6:CBT), which traded all the way up to 166.28, up two full handles. The 1.74 million ES contracts traded was an uptick in the daily volume, but still not overly large when you consider the big move down and the big move back up late in the day. Throughout the day, the yen and bonds maintained their rally, but the S&P 500 futures found an early first hour low and began to climb throughout the midday into the afternoon. Going into the close, the ES was once again tagging the 2100 level before closing just off the highs on a MOC imbalance of over $1 Billion to buy, making it $1 Billion+ to buy in three of the last five MOC days.
Thinking You Know Better
I have been preaching about becoming more patient, and on Friday instead of paying attention to the ESM16 trading range, I bought too early. I knew the Twitter ‘bears’ were out calling for blood, but by the time the ES actually rallied I had tried to buy the futures 3 different times, with the final trade being stopped out at 2083.50, three ticks off the low of the day. It happens like that when you think you know better than the markets. They have a way of ‘feeling’ out bad trading decisions, and most of the time (like Friday), the markets will go back the other way. It’s just a question of how much you are willing to risk!
It’s become obvious that until the market shows a different hand the tape clearly favors dip buyers. Sure, 2100 has been resistance, but the inability of sellers to capitalize on this resistance and maintain a push lower is telling. Last year the S&P futures spent a lot of time crossing back and forth through 2100. Heading into this summer, it feels that one of these time the S&P is going to bounce above, stay above, build a floor there and start to target many of those upside buy stops.
Overnight, markets in Asia and Europe rallied modestly helping the S&P 500 futures maintain a sideways bid on low volume at 6:30 am cst. The ESM16 traded up to 2102.75 early in the European session, up 8.75 handles from the early 2094 globex low, and is currently just trading two handles off that high. Today’s calendar features Janet Yellen speaking in the afternoon which could lead to some volatility, otherwise, it looks to be a “Mutual Fund Monday” with a low volume grind higher. Levels to watch are the 2095 – 2094 globex low area, then Friday afternoons 2091.50 low. Pullbacks to these areas look like good buying opportunities. To the upside, bulls need to push above Friday’s globex high today, making a higher high.
In Asia, 8 out of 11 markets closed higher (Shanghai -0.16%), and In Europe, 8 out of 11 markets are trading higher this morning (DAX +0.14%). This week’s economic calendar includes 20 reports, 3 Fed speakers and 11 US Treasury events. Today’s economic calendar includes Eric Rosengren Speaking, Gallup US Consumer Spending Measure, Labor Market Conditions Index, 4-Week Bill Announcement, 3-Month Bill Auction, 6-Month Bill Auction, TD Ameritrade IMX, and Janet Yellen Speaks.
Our View: Smart guys don’t always win in this game, patient guys (and gals) win. It’s one of the hardest and most profitable things we can learn. Had I widened out my stops to 5 handles, I would have caught it, but that goes back to the “shoulda, woulda, coulda” thing that just doesn’t work in the real world. You are either in, or you’re out, there is no between.
There are a lot of low level economic reports this week, 20 compared with last week’s 25. June is kicking into gear and kids are getting out of school. Plain and simple there is going to be less trading. That doesn’t mean the ES and NQ won’t be moving, they will be, I think there is a lot of chop coming.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed higher: Shanghai Comp -0.16%, Hang Seng +0.40%, Nikkei -0.37%
- In Europe 8 out of 11 markets are trading higher: CAC +0.02%, DAX +0.14%, FTSE +0.97% at 6:30am CT
- Fair Value: S&P -1.47, NASDAQ -1.20, Dow -12.90
- Total Volume: 1.7mil ESM and 6.8k SPM traded
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