S&P 500 Futures “Boat Too Full”

on March 27, 2015

After making a 2033.25 low in Globex Wednesday night, the S&P futures (ESM15:CME) did as it often does and went quiet. Later in the morning, it short covered just before the S&P opened at 8:30 CT. After a few attempts on the downside, the S&P futures started to short cover, hitting buy stops all the way up to the highs of the day. Meanwhile crude oil rallied as Saudi Arabia launched over 100 warplanes on the first day of its military campaign in Yemen.

I am not going to bore you with the usual Opening Print today. All the negatives have been clearly defined. The S&P 500 is going to have to make a decision over the next couple of days, up or down. When you look at the overall price action of the stock market, it does not have the same feel as it did in 2013 or 2014. This year the markets really feel like they are laboring. A few months ago the conventional wisdom was to start buying Europe and selling the US. Over the last several weeks, especially in the last week or so, the DAX has pulled back, as has the Stoxx 600. It’s obvious there has been some type of shift to taking profit. Yesterday’s trade in the S&P futures saw a high level of algorithmic activity with the S&P moving from buy programs to sell programs and back all day. At the end of the day both the Dow and S&P futures closed down -0.2% and the Nasdaq Comp closed down -0.30%.

The S&P futures have now fallen 9 out of the last 12 sessions, down 4 out of the last 5 or down 4 in a row.

Mar 10 ESM15 -35.8

Mar 11 ESM15 -2.4

Mar 13 ESM15 -14.2

Mar 16 ESM15 +26.7

Mar 17 ESM15 -2.10

Mar 18 ESM15 +26.4

Mar 19 ESM15 -11.0

Mar 20 ESM15 +17.6

Mar 23 ESM15 -4.40

Mar 24 ESM15 -10.1

Mar 25 ESM15- 31.1

Mar 26 ESM15 – 5.30

Earlier this week I described the S&P’s trade as “up 1%, down 1%” and to me that is what it feels like. Is the S&P rolling over? I do not think so. Will the S&P continue to bounce? I think it can and will, but I am still concerned that all the MOC selling we have been seeing for the past 4 days may continue. If that’s the case, the S&P may be stuck in a sell the rallies thing right now. But it won’t remain that way when the mutual funds start putting the money they sold back to work. That tends to be the pattern. In a new quarter it’s even more likely the funds will start buying.

Moral of the story: If you want to know where the S&P is going, follow the money (MOCs).

In Asia 6 out of 11 markets closed higher and at 6:00 CT in Europe 7 of 12 markets are trading modestly higher this morning. Today’s economic calendar starts with Federal Reserve Vice Chair Stanley Fischer’ speech to the Bundesbank conference on bank regulation, in Frankfurt, GDP, Corporate Profits, Consumer Sentiment and Federal Reserve Chair Janet Yellen’s speech on monetary policy at the San Francisco Fed conference.

T+3

Our View: Crude oil closed up 4.5% yesterday. Crude oil already started looking like it was back-and-filling at the $47 to $48 level, but it really broke out yesterday. War is breaking out all over the Middle East. The markets have a very volatile feel to them right now. Last night they traded up to a high of 2057.75, sold off down to 2041 and are trading 2046.25, down 1.25 handles. It’s my guess we see another day of two-way trade; sell the early rallies and buy weakness.