Wednesday nights weakness in Asia and Europe spilled over to the U.S. markets yesterday. The S&P 500 futures (ESU17:CME) opened the 8:30am CT cash session at 2420.75, down -7.25 handles, and the Nasdaq 100 futures (NQU17:CME) opened at 5607.25, down -47.25 points. Both futures immediately began selling off on the bell, finding early lows at 2414.25, and 5590.25, just after 8:45am CT.
The positive release of the ISM non-manufacturing index (57.4 vs. 56.9 month/month) at 9:00am wasn’t enough to jump start the futures. After a small pullback to 2418.00, the ES tumbled down to 2410.25, and the NQ fell to 5580.00. From there, stocks drifted sideways in a 4 handle range until 11:00am, when the EIA petroleum status report was released.
Crude Oil Pump & Dump
Oil inventories in the U.S. dropped significantly this week, initially sending crude oil (CLQ17:NYMEX) and stock futures higher. The NQ took the ball and ran with it, rallying from 5591.75 up to 5624.50. The ES found strength also, but not quite as much as the NQ, it popped up to 2418.50, then slowly trickled back down to 2414.50, before topping out at 2420.00 and trading in a 5 handle range through the lunch hours. Crude oil traded up to 46.53, but the rally was short lived, and by 12:30pm CT, the CLQ had printed a new low at 45.18.
Just after 12:30pm CT, a wave of selling came in, pulling the ES out of the lunch range and down to 2411.50. As the MiM opened up showing small to sell, and started to grow, the ES continued to slowly down tick, eventually making a new daily low at 2405.25. From there, both the ES and the NQ went on to rally into 3:00pm cash close, taking back some of the late day losses.
At the end of the day, a lot of positive data was released, but the futures just couldn’t spin it. The S&P 500 futures (ESU17:CME) settled at 2408.50, down -19.50 handles, or -0.81%, the Dow Jones futures (YMU17:CBT) settled at 21280, down -142 points, or -0.67%, and the Nasdaq 100 futures (NQU17:CME) settled at 5596.75, down 54.75 points, or -0.97%.
Unemployment Report
June Non-Farm Payrolls – 222,000
June Unemployment Rate – 4.4%
According to @jeffsparshott from the Wall Street Journal:
U.S. employers added 138,000 jobs in May, capping off a relatively soft three-month stretch. Over the past year, nonfarm payrolls have increased by an average of 189,000 jobs per month, a pace that may be difficult to match if workers are increasingly scarce while the labor market tightens. “Filling new openings will continue to become more difficult for employers,” said Mark Simenstad, chief investment strategist at Thrivent Asset Management.
The unemployment rate fell to 4.3% in May, the lowest level in 16 years. If it holds or even falls, that would also suggest the labor market is tightening and reinforce Federal Reserve plans to raise short-term rates a third time this year. Of course, the unemployment rate can fall for two reasons—watch to see if people are getting jobs or simply dropping out of the labor force.
While You Were Sleeping
Overnight, equity markets in Asia traded mostly lower, led by the ASX 200, which closed down -0.96%. In Europe, all major markets are currently trading lower, with the FTSE MIB index leading the way at -0.76%. In the U.S., the S&P 500 futures had a slow night, and were held to just a 4.25 handle range. The ES opened the globex session at 2409.25, and have been trading sideways in a low volume grind between 2407.50 and 2411.75, in anticipation of this mornings jobs report. As of 6:30am CT, the last print in the ES is 2408.50, unchanged, with just over 100k contracts traded.
In Asia, 8 out of 11 markets closed lower (Shanghai +0.16%), and in Europe 12 out of 12 markets are trading lower this morning (FTSE -0.01%). Today’s economic calendar includes the Employment Situation, EIA Natural Gas Report, the Baker-Hughes Rig Count, and Treasury STRIPS.
Our View
Since making the 2451.50 high back on June 19th, the S&P 500 futures have made a series of lower highs, as the ES is back and filling above 2400. Last weeks low was 2402.25, the May end of month selling saw a low of 2402.75. Prior to that, the early May high was 2403.75, and then May’s mid month high was 2404.50. In other words, there has been a lot of pivoting just above 2400 in the 2402.25 – 2404.50 area since early May.
What does this mean? Today is non-farm payroll day, and the last few have been duds. However, if the futures sell off below this area, and close below 2400, we have to start looking for resistance just above 2400, which could result in an overall weaker market heading into the latter part of the seasonally slow period between Memorial Day and Labor Day.
My friend Tony LaPorta often says “don’t lose your arse on a Friday,” and WB use to say something along the lines that to change the market trend on a Friday is tougher than “finding a virgin in Compton”.
If the S&P starts to run stops below 2400 today we don’t want to be stuck trying to buy this dip. We will be using time pivots to help set our intraday bias using the 7:30 am cst NFP print and the 8:30am CT opening print.
Market Vitals for Friday 07-07-2017
[gview file=”https://mrtopstep.com/wp-content/uploads/2017/07/Market-Vitals-17.07.07.pdf”]
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 +0.16%, Hang Seng -0.49%, Nikkei -0.32%
- In Europe 12 out of 12 markets are trading lower: CAC -0.35%, DAX -0.20%, FTSE -0.01%
- Fair Value: S&P -2.36, NASDAQ +2.84, Dow -51.73
- Total Volume: 1.6mil ESU, and 1.8k SPU traded
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