The S&P 500 futures (ESM16:CME) sold off on Wednesday nights Globex session, then continued to sell off during Thursday’s day session, down to 2026.00, and then proceeded to rally on the cash close when the MrTopStep Imbalance Meter (MiM) showed $400mil to buy. Over the last few days the S&P has weakened, but with the S&P cash study showing a statistically positive April options expiration, the weakness may not last very long.
The S&P will never do what everyone wants it to do when they want it to. After a 265 handle rally in the ES, most traders are wondering if the current sell off will end up like all the other lately, selling off a little then going back up. That’s what most traders we talk to are saying. As I write this it’s 10:00 pm and the ESM16 just traded up to 2038.00.
Overnight the futures have rallied from yesterday’s lows, trading just below the 2050 level this morning, making a high of 2049.00, up 14.00 handles, just two hours into a strong European session. Currently, the ESM is trading at 2046.00, just three handles below the overnight high. Today’s calendar is quite light and globex volume is under 250K at 7:15 am CT. Given all these factors, including the run up overnight, we are looking for the possibility of a thin to win type trade with the overnight high, weekly pivot and big round 2050 area becoming our risk marker. Above that 2050 price we could potentially see a grind up to 2060 matching yesterday’s globex high. However, if 2050 is resisted and the ESM maintains the first hour hour of the cash session below the 8:30 ct open, then the market could see some risk off heading into the weekend.
In Asia, 8 out of 11 markets closed lower (Shanghai Comp -0.78%), and In Europe, 12 out of 12 markets are trading higher this morning (DAX +0.89%). Today’s economic calendar includes Fed’s Dudley Speaking, Fed’s Kaplan Speaking, Wholesale Trade, and Baker-Hughes Rig Count.
Our View: It’s going to be a slow day to end the week. Friday’s are difficult to trade like a hero, and we urge you not to trade out of boredom. We are looking to sell the early rally around the 2050 area on first touch, or buy the early weakness around 2035. However, we see two possibilities playing out; either some buy stops being run above 2050, or a push back to the 2035, which could hold as support or lead back to yesterday’s low. It’s the week before options expiration and we are looking for the Pitbull’s Thursday/Friday low to hold into next week, but if somehow sellers manage to push it down today near yesterday’s lows, then we are looking for bearish follow through next week aiming at a 2000 – 1980 print.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed lower: Shanghai Comp -0.78%, Hang Seng +0.51%, Nikkei +0.46%
- In Europe 12 out of 12 markets are trading higher: CAC +0.80%, DAX +0.89%, FTSE +0.69% at 6:15am CT
- Fair Value: S&P -7.35, NASDAQ -8.73, Dow -92.70
- Total Volume: 2.0mil ESM and 6.6k SPM traded
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