Up a Day / Down a Day
Who’s winning in the S&P 500 futures trading game? I’ll tell you who, it’s the brokers and the algos. Right now there is no trend. It’s just one big game of chop. Squeeze the shorts out on the up days, and wash out the longs when the S&P sells off. We all know it can’t stay like this. We all know at some point the ES will make its move. Is it going to be a ‘spooky’ down October? Or will the bulls come charging back and push the futures above ES 2200.00? Personally, I think all of the above.
October Off To A Bumpy Start
A quick overview of yesterday index trade. The e-mini S&P 500 futures (ESZ16:CME) up 6 handles in premarket at 2159.75 and then trading 2155.75 on the 8:30 ct futures open. The price action in the session was somewhat erratic. The ESZ traded from an early high of 2158.25 down to 2147.75 in the first hour. Then there was a move back up to 2157.25 before going back down to 2145. All of this happened before the Euro close. From there the spoos traveled back to 2156.50, just after the Euro close, making another lower high before the bottom fell out. The S&P traded down to 2136.00 going into the final hour before bouncing back up to 2145.50. The last rally made it a total of six moves of 9 handles or more during the session. Ultimately the futures settled the day at 2144.75, down just 8.75 handles.
In the end, the first two trading days of the new quarter has the S&P down -0.86%. Was it the British Pound that fell to a 31 year low? Or was it anxiety over the ECB’s QE plans after Bloomberg report that consensus was building within the ECB for “tapering” its QE program? Or is it the threat of an interest rate hike in December looming over the markets? There are several legitimate concerns surrounding the markets right now, but at the end of the day, none of it is new.
While You Were Sleeping
Overnight equity markets in Asia were mixed to lower as the Shanghai Composite remains closed this week. Europe opened up trading lower this morning as the ESZ traded sideways, making a low of 2141.00, just after European open. There was a rally up to a 2147.25 high keeping the ES trading in a 6.25 handle range. Currently the index is trading at 2143.75, down a single handle on the session, with volume at 121k on 6:00 am cst. Today’s calendar picks back up a bit, and if the S&P breaks yesterday’s low, I think it can easily run 10 handles lower.
In Asia, 7 out of 10 open markets closed lower (Nikkei +0.50%), and in Europe 9 out of 11 markets are trading lower this morning (DAX -0.63%). Today’s economic calendar includes MBA Mortgage Applications, ADP Employment Report, International Trade, Gallup U.S. Job Creation Index, Neel Kashkari Speaks, PMI Services Index, Factory Orders, ISM Non-Mfg Index, EIA Petroleum Status Report, and Jeffrey Lacker Speaks.
Whipem Up Wednesday
Our View: The Pitbull often describes the S&P’s action as “water in the bathtub” sloshing back and forth, and that type of two sided trade is exactly what we are seeing. As weak as the ES is acting, it’s still holding up. We think that we will see more of the same going into NFP, but the chart suggests a break below 2134 can easily lead to 2120. We want to continue to try to buy dips, but looking 10-15 handles off the highs while selling rallies into NFP.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 10 open markets closed lower: Shanghai Comp closed, Hang Seng +0.42%, Nikkei +0.50%
- In Europe 9 out of 11 markets are trading lower: CAC -0.63%, DAX -0.63%, FTSE -0.49% at 6:00am ET
- Fair Value: S&P -6.35, NASDAQ -6.39, Dow -88.44
- Total Volume: 2.1mil ESZ and 8.7k SPZ traded
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