There are multiple reasons why the equity markets have been rising. First is the positive statistics surrounding the shortened Thanksgiving week. Second is the best 6 months for stocks ‘November to April.’ Third is all the buy stops resting in the S&P futures, and lastly, and the part that many do not like to hear… Donald Trump and his political shake up.
I do have a saying for the everything that’s going on in the stock market. Its called CNW, or ‘crazy, nuts and wild.’ There was a limit down move to 2028.50, and 10 days later the futures are trading at 2196.25. That is a gain of 127.75 handles, or a 12.75 handle gain per day. The Dow futures (YMZ16:CBT) have gained 1,420 points, or + 8%, and the Nasdaq futures (NQZ16:CME) are up 7.25% or 308 points from Super Tuesdays ‘limit down.’ To say that the Trump election was, or is not, bullish is just foolish. The markets have reacted in kind. There is no telling what the next move is going to be, but if you said ‘dboy tell me which way,’ I would have to say up. Most of that is the seasonals, but like I said above, it’s all buy stops up to 2210.00.
We said that it would be thin to win, a slow market that chops you out but leans higher, and if you have the patience, and can hold winners, you can be paid. Yesterday, the 8:30 am cst open was at 2186.50, up 6.00 handles from Friday’s cash session close, and the ESZ rallied up to 2191.25 early. That’s a new contract high, and a tick away from an all time high print on the mini. After that there was a sell off down to 2184.75. That sell off was all the dip buyers needed. The ES held 2184.75 throughout the day, until just before the close, when the futures broke on the earthquake news out of Japan and tsunami warning.
At the end of the day, the 2192.75 settle was still good for a higher close by 12.25 handles, the highest closing price for the S&P futures ever. Then, overnight stock markets in Asia caught a bid, and the ESZ began to take out more upside stops. The index futures sliced through Monday’s high all the way up to 2203, 10.25 handles above the settlement. After making that high early in the globex session, the futures have traded sideways to lower, even as Europe has opened higher. The 2198.25 low a few minutes ago is the recent low, and the ESZ is sitting a handle above that at 2199.25, up 6.25 handles, on volume of 113k at 5:56 am cst.
Today’s calendar features Existing Home Sales, and outside of that, looks to be very quiet. We expect volume will probably be 20% lower today as traders are looking for that early weekend door. Dip buyers need the ESZ to build a floor at the top of yesterday’s range, 2193-2196, to retarget 2200, but with more fuel next time that will then build a higher floor at 2200.
From Barclays:
In Asia, 10 out of 11 markets closed higher (Shanghai +0.94%), and in Europe 10 out of 11 markets are trading higher this morning (FTSE +0.95%). Today’s economic calendar includes Redbook, Existing Home Sales, Richmond Fed Manufacturing Index, a 4-Week Bill Auction, a 2-Yr FRN Note Auction, and a 5-Yr Note Auction.
Our View: The old saying about ‘the markets go up and the markets go down’ has been fairly one sided over the last few weeks. President elect Donald Trump announced yesterday that he is going to kill the Trans Pacific Partnership agreement in his first move to ‘bring jobs back to America. While many may not see it that way, the timing of the sell off, and ‘brisk rally’ back, has been astonishing to watch. From the 2028.50 limit down price to this morning’s high, the S&P futures have rallied a total of 8.5%. I understand the seasonals that are at work, but I believe there is something going on under the surface. Call it a shift in mentality if you like, but the ugly feeling I had over a month ago has dissipated.
Today’s economic calendar is a bit light, but tomorrow there is a full schedule. The S&P has now taken out buy stops all the way up to 2203. The futures have now traded above the ‘big figure.’ What we don’t want to do is get caught buying into an all-time high after a 174.50 handle rally. While the markets look great, and more than likely want to go higher, there will be pull back. Our view is to sell the early rallies and buy weakness, keeping in mind two variables; 1) the ESZ, YMZ, and NQZ are all overbought short term, and 2) with the Thanksgiving holiday upon us, volumes are sure to drop, which means ‘thin to win.’ You can take it from there.
‘S&P 500 Futures: The Thanksgiving Rip and the Best 6 Months For Stocks’
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 10 out of 11 markets closed higher: Shanghai Comp +0.94%, Hang Seng +1.43%, Nikkei +0.31%
- In Europe 10 out of 11 markets are trading higher: CAC +0.68%, DAX +0.53%, FTSE +0.94% at 6:00am ET
- Fair Value: S&P -2.45, NASDAQ -1.31, Dow -32.73
- Total Volume: 1.2m ESZ and 4.5k SPZ traded
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