On Monday’s trade, the ESM went down and tested Friday’s lows, and yesterday the ESM sold off down to last weeks low at 2096, double bottomed and traded back up to the 2109.00 area. In both cases the algorithmic trading programs zeroed in on those levels while they searched for sell stops to run. One minute you think you’re safe, and then the next your sell stop is filled and the S&P starts to move back in your favored direction. It’s hard trading against the robots, especially when the futures are doing such a big churn.
Other than the same old stuff being thrown around, there really is not that much new to talk about. Greece, US interest rate hikes, the dollar, and oil prices. Greek lawmakers are saying Greece will not pay the IMF without the prospects of a deal. We have said all along that the Greeks will not make the payment even after they said they had a bailout plan. I am sticking to my idea that Greece will eventually default, and that while the default may add some short term weakness to the S&P, its the European broses that will get hit the hardest. This morning Greek officials are offering what they call a “final draft” that European officials say amounts to a take-it-or-leave-it offer. Personally I think this situation has dragged on far too long, and that while the global stocks markets will take a hit, there will also be a relief rally.
So where are we in the S&P? Thats a great question. Like the title of the Opening Print today, its all been about the big churn. Traders all jump back in when they see the ESM15 start to sell off because, like always, the bears don’t want to miss the “crash” that never comes, and in the short term if you took Greece out of the equation we would probably be trading higher, but until this is resolved, one way or the other the ES will continue to stumble into the rallies. Additionally since the end of March there has been non-stop MOC selling going into the closes everyday. It looks like there has been some sell bonds / buy stocks going on but its not showing up on the close. Everything has become so short term it’s hard to see through the woods.
I like to write about the S&P but the ranges are narrowing while the volume is increasing while the S&P futures continue to hold above the big figure at S&P 2100. Good or bad it looks like the Greek / ECB stalemate is about to come to some type of conclusion.
In Asia 8 out of 11 markets closed lower, and in Europe 9 out of 12 markets quoted are trading higher this morning. We have a busy economic calendar today starting with the MBA Mortgage Applications, ADP Employment Report, International Trader, Gallup US Job Creation Index, PMI Services Index, ISM Non-Mfg Index, EIA Petroleum Status Report, Beige Book, Chicago Federal Reserve Bank President Charles Evans speech to banking symposium in Chicago, and St Louis Federal Reserve Bank President James Bullard press briefing in St. Louis.
Our View: This morning we have a busy economic schedule and some fed speak later in the day. Two floor traders I spoke to said they did not think the current grind would continue, I think it’s going to go right into the summer and beyond. As more people take time off over the summer, the volume will drop, and the big churn will only get worse. Our view; sell the early rally and buy weakness.
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- In Asia 8 of 11 markets closed lower: Shanghai Comp. -0.01%, Hang Seng +0.69%, Nikkei -0.34%
- In Europe 9 out of 12 markets are trading higher : DAX +0.50%, FTSE -0.03%, MICEX +0.48% , GD.AT +2.61% at 3:30 am CT
- Fair Value: S&P , Nasdaq , DOW
- Total Volume: 1.44mil ESM and 3.3k SPM traded
- Economic calendar: MBA Mortgage Applications, ADP Employment Report, International Trader, Gallup US Job Creation Index, PMI Services Index, ISM Non-Mfg Index, EIA Petroleum Status Report, Beige Book, Charles Evans and James Bullard from the Fed speak.