Things happen. Last week it was President Trump’s Syrian cruise missile attack and some weaker than expected economic reports. Yesterday it was a shooting at an elementary school in San Bernardino. It doesn’t matter how good or bad the news is, everything is ‘event driven’. The public panics and starts selling, but the algos are already ahead of it. The same goes for when the selling dries up and the S&P 500 futures start to ‘pop’ back up, the algos jump in front and help lead the index higher. Maybe you agree, and maybe you don’t, but these truly are ‘not our father markets’. When there is no major news the ES just chops up and down, but it seems like once the news is out the (ESM17:CME) futures start to grind higher again.
Yesterday the (ESM17:CME) e-mini S&P 500 futures open at 2354.25 on the 8:30 CT future open and went straight up to 2363.25. At the highs I pointed out the selling that was showing at 2363.00:
Dboy:(10:36:52 AM): seller off the 63s
Dboy:(10:39:38 AM):yep .. get a little two way price action
Dboy:(11:33:29 AM):4 sell programs in a row
Then, after the futures sold off under 2350.00, I put this out:
Dboy:(11:34:23 AM):two way street
Dboy:(11:38:33 AM): I think we are close to a low/ bounce
Dboy:(12:23:48 PM):4k buys off the 49s
Dboy:(12:24:25 PM):4 buys 4.7k bought
I know this is not a perfect way to read the S&P futures, but when you see sell programs and the selling / volume start to let up, it makes it easy to reverse. Believe it or not, it was the same algorithmic and hft programs that helped push the ES lower that buy the ES back up.
After the ESM went back up and made a new high by 1 tick at 2360.25 and the MiM was showing $450 mil to buy, I put this out:
Dboy:(3:00:14 PM):Notice how when the MiM is big to buy early there is always a dip under the vwap.
That’s exactly what the ES did, it sold off 6 handles down to 2354.00, and thats when I put this out:
Dboy:(3:23:10 PM) : now is when you get long
Dboy:(3:23:20 PM) : with a tight stop
Dboy:(3:23:45 PM) : just can’t get fooled by the big early buys.
By the end of the day the MOC came in flat, and so was the outcome for the S&P’s. We expected to see thin-to-win in the morning, and we did, then buying dips around 2350 worked as well. The futures settled the day at 2352.75, just a tick higher than Friday’s 3:15 pm cst close.
While You Were Sleeping
Overnight, equity markets in Asia and Europe were again choppy and mixed, but with an overall lower tone. In the U.S., the S&P 500 futures opened the overnight session at 2354.25 and made it’s globex high at 2355.75 in the first half hour of trading before falling down to 2347.50 early in the Tokyo session. Since then, the ES traded back up to 2353.50 in the Euro session, failing just below the globex open. As of 5:52 am cst the last print is 2351.75, down three ticks on the session, with volume at 122k.
In Asia, 7 out of 11 markets closed lower (Shanghai +0.60%), and in Europe 6 out of 11 markets are trading lower this morning (FTSE +0.59%). Today’s economic calendar includes NFIB Small Business Optimism Index, Redbook, JOLTS, 4-Week Bill Auction, 10-Yr Note Auction and Neel Kashkari Speaks.
Our View:
I think the markets have an uneasy feeling to them. I am not saying anything major is going to happen, but the markets feel nervous to me. According to Sentiment Trader ‘the SPX is typically strong the 3 days before Good Friday and after the holiday. The week after Good Friday is the April OpX, another seasonally strong week. Seasonality has not been particularly accurate over the past few months, but these are potential short term tailwinds’.
Late in yesterday’s trade the ES looked great, but it rallied too early when the MiM was showing almost $500 mil to buy. As the MiM backed off so did the ES futures. Maybe the ES needs a few days of back and filling.
Our view; Today is TurnAround Tuesday. We think it could be like yesterday where you see both sides of the trade, up and down. Recently the ES has had an early pop and then drops / pulls back, and rallies again. You can take it from there. If we got a mid week sell off I would look to buy some calls.
PitBull: CLK osc 27/6 turns down on a close below 5289, ESM osc -3/-5 turns down on a close below 235152, VIX osc 13/3 turns down on a close below 1249.
Market Vitals for Tuesday 04-11-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets closed lower: Shanghai Comp +0.60% , Hang Seng -0.72% , Nikkei -0.27%
- In Europe 6 out of 11 markets are trading lower: CAC +0.11%, DAX -0.09%, FTSE +0.59% at 6:00am ET
- Fair Value: S&P -3.38, NASDAQ -0.02, Dow -64.58
- Total Volume: 1.35 mil ESM and 5.1 k SPM traded
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