All the ‘up a day/down a day’ price action is wearing the retail traders out. It’s a hard thing to deal with and it doesn’t make it any easier to make money.
After falling nearly 40 handles (points) at the low during Tuesday’s trade the S&P futures (ESZ16:CME) sold off initially after the 8:30 ct futures open. The ES traded under the overnight Globex low by .75 points and then rallied quickly up to the 2137.50 level, where yours truly came out saying:
10:29:55 TRADINGDATA2: (driley) I think we could be at or near the early high.
Just after that text the ESZ sold off down to 2129.75 and then rallied back to the 2134.50 level in a very slow trade.
While there seems to be a decent amount of headline news, the Jewish holiday ‘Yom Kippur’ has definitely had a slowing effect on the day’s trade. After a few attempts at the high of the day the ES traded up to 2137.50, pulled back a few handles, then popped up to a new daily high at 2138.25. The new high print was followed by a quick sell off down to the 2133.50 level in very choppy trade.
MIM
Late in the day the MrTopStep Imbalance Meter started showing $160 million to sell. It went as low as $300 million to sell before rallying to only down $100 million to sell. The actual MOC came out sell $350 million and the ESZ16 sold off down to 2130.00 going into the 3:00 cash close.
Clearly the Jewish holiday impacted the day’s trade. In terms of the day’s overall price action, the ES did not act that bad until late in the close. After the stock market close the S&P looked even weaker, trading down to 2127.50, before the contract close.
Overall, after Tuesday’s trend day, bulls were unable to match the bearish price action and mount a comeback. Meanwhile, bears were expected to take a day off after a big down day, but they showed up anyway going into the close.
Fed Minutes
Yesterday’s big headline was the release of the Fed minutes. Most banks have written in their research notes that they expect a December rate hike. The Fed Fund Rate futures suggest this probability to be at 70%. However, after yesterday’s event, Barclays released a note stating that…
“Our base case remains for a December rate increase, but the FOMC minutes reveal widespread discord within the committee on a variety of issues.These divisions, plus the tendency of the incoming data to be positive, but with blemishes, means a rate hike in December is not a done deal by any means.”
Meanwhile, Goldman Sachs released a note suggesting that they are buyers of stocks at SPX 2106, and went so far as to say that:
“At this point, the ideal scenario would be to see a quick move down towards ~2,106 and then some kind of base/reversal. Reaching 2,106 would satisfy the need for a corrective process and therefore provide a much cleaner setup to consider getting back into the uptrend. It’s important to emphasize that anything lower than 2,106 suggests that the decline is in fact more impulsive than corrective.This would open up downside risks to 2,060 (1.618 from the August high). Moreover, it would increase the chances of a much more complex/prolonged corrective process.”
While You Were Asleep: Weak China Numbers and Deutsche Bank Hiring Freeze
Overnight equity markets in Asia were weak. After Europe opened, things got even weaker, as many of Europe’s major indexes are down over 1%. The ESZ broke down making a new weekly low early in the Asian session. A new low was made at 2113.50 shortly after the European open. The futures down as much as 15 handles, or -.70%, before finding the first rally of the session. The rally took the ES back up to 2121.50, and is currently sitting a handle off that high, with just over 215K contracts traded at 6:15 am cst.
With the September 2100 low within easy reach, it looks like there may be plenty of energy going into the end of the week. We had 2113 as a key level, and that held overnight, but if it fails there is not much holding the S&P above 2100.
Bears need to push the index to close at least below 2110 today. Meanwhile, Bulls need a sharp rally off the globex double bottom, but it’s hard to see that coming. We are looking at some resistance at 2135.
In Asia, 9 out of 11 markets closed lower (Nikkei -0.39%), and in Europe 11 out of 11 markets are trading lower this morning (DAX -1.30%). Today’s economic calendar includes Jobless Claims, Import and Export Prices, EIA Natural Gas Report, EIA Petroleum Status Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 30-Yr TIPS Announcement, Patrick Harker Speaks, a 30-Yr Bond Auction, Treasury Budget, Fed Balance Sheet, Money Supply, and Neel Kashkari Speaks.
PitBull’s Thursday/Friday Low on Taps
Our View: In terms of economic reports and earnings, today’s schedule is the busiest of the week. Both crude oil and natural gas report at 9:30, and there is some late day Fed speak. After the close yesterday the ES got hit down to 2127.00. I can’t speak for you, but I think the markets have a spooky feel to them. I can’t put my finger on it, but the ES rallies, and then falls right back. Hard to think that’s bullish! Our view is to look for a two way trade. My gut tells me that the ES could knock out the 2120 level, which the PitBull says won’t be good. Right now the public is confused. No one knows what to think about how the election will play out, and October tends to be a scary month.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 9 out of 11 markets closed lower: Shanghai Comp +0.09%, Hang Seng -1.61%, Nikkei -0.39%
- In Europe 11 out of 11 markets are trading lower: CAC -1.31%, DAX -1.30%, FTSE -0.74% at 6:00am ET
- Fair Value: S&P -6.07, NASDAQ -6.67, Dow -89.34
- Total Volume: 1.48m ESZ and 3.6k SPZ traded
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