Friday was another case of a failed early rally. The S&P 500 futures (ESM17:CME) rallied on Globex, but started to sell back off before the 8:30 CT futures open. After the open the ES traded 2353.00, sold off a few handles, and made a series of drops and failures at the VWAP. By 1:30 CT there were four separate failed buy attempts.
After taking 3.5 hours to sell off 12 handles, down to 2340.50, the Trump tax reforms headlines hit the tape. “Trump tells AP he will unveil tax plan next week that includes massive tax cut for individuals and businesses.” It took just over an hour for the ES to rally back up to vwap at 2349.50, and it only took 30 minutes for it to sell back off under 2344.00.
Plain and simple; the markets act weak despite a solid batch of earnings and mixed to stronger economic reports. The ES has traded within 10 handles of 2350 for the last 23 trading sessions, fitting my idea that the futures are trading in a 2330 – 2380 range.
There are a lot of ‘unknowns’ overshadowing the S&P right now. It was only a month ago that the economy was sailing along, and now there is talk of an economic slowdown and inflation. Above all though, I still think the Fed’s plan to pay back $4.5 billion is going to be a market stopper. If it was QE that helped push the markets up, then what will happen when the Fed tries to pay it back? Additionally, it was just about a month ago that the Fed was saying there would be three more rate hikes in 2017, and now they are saying two for sure.
Despite closing down 4.7 points on Friday’s bell, the positive bank earnings reports helped push the S&P to its first weekly gain of the month. At least part of the S&P’s weakness has been tied to doubts about Trumps ability to deliver, and according to FactSet, only 6% of companies in the S&P 500 have reported first quarter results, and three quarters of them have beaten the mean earnings estimate.
On the week, the Dow Jones futures (YMM17:CME) gained 80 points, or +0.40%, to 20487. The S&P 500 futures (ESM17:CME) edged up 17.75 points, or +.80%, to 2345.25, and the Nasdaq 100 futures (NQM17:CME) rallied 78.50 points, or +1.00%, to 5436.00. Financial stocks in the index ended the week up 1.1% after several big banks beat first-quarter expectations, and the yield on the benchmark 10 YR U.S. note fell to 2.234%.
Vive La France!!!
While You Were Sleeping
Overnight, the French election took center stage. Early results from the showed Emmanuel Macron and Marine Le Pen advancing to a presidential runoff. In Asia, equity markets mostly rallied, with the exception of the Shanghai Composite, and Europe opened sharply higher, with the French CAC up 4.45% rallying on the news.
In the United States, the S&P 500 futures gapped up 20.50 handles to open the globex session at 2365.75, and then pushed up to 2372.75. From there, the futures traded down to a session low of 2365.50 before rallying up to 2376.75 going into the Euro open up, 29.75 points. As of 5:50 am cst the last print is 2375.00 up 27.50 points on volume of 255K.
In Asia, 8 out of 11 markets closed higher (Nikkei +1.37%), and in Europe 12 out of 12 markets are trading higher this morning (CAC +4.45%). This week’s busy economic calendar includes 27 economic reports, 4 Fed speakers and 14 U.S. Treasury events. Today’s economic calendar includes Chicago Fed National Activity Index, Dallas Fed Mfg Survey. a 4-Week Bill Announcement, a 3-Month Bill Auction, a 6-Month Bill Auction, and Neel Kashkari Speaks.
Our View
Is the French election runoff heralding in a new political era for France like Donald Trump did in the U.S.? Are the French people looking for a tougher leader? It sure seems that way to me.
I think it started with Brexit, then moved to the U.S. election, and is now spreading throughout Europe. Who will be the next to go? The euro currency was up over 2% after the vote, but that was not the only thing moving. I told Cyrus, the former head of Goldman prop trading, that after everyone sold, the ES would rip higher, and that’s exactly what happened.
Tomorrow’s Opening Print will be dedicated to what I call ‘event driven’ trading. Our view today is to sell the early rallies and buy weakness. With the ES rallying 30 handles overnight, and with ES volume at close to 300k at 7:00 am, we expect a busy day.
PitBull: CLM OSC -37/14 TURNS UP ON A CLOSE ABOVE 5032, ESM OSC 1/-2 TURNS DOWN ON A CLOSE BELOW 232263, VIX OSC -1/9 TURNS UP ON A CLOSE ABOVE 160.
Market Vitals for Monday 04-24-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed higher: Shanghai Comp -1.37%, Hang Seng +0.41%, Nikkei +1.37%
- In Europe 12 out of 12 markets are trading higher: CAC +4.45%, DAX +2.99%, FTSE +1.87%
- Fair Value: S&P -3.54, NASDAQ -2.16, Dow -61.51
- Total Volume: 1.27 mil ESM and 3.8 k SPM traded
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