It doesn’t seem like very much affects the S&P 500. It used to be that the ES would turn bad news into good, but now it seems like all the news is good news, or at least good for the U.S. stock market.
I started on the trading floor of the Chicago Board of Trade 40 years. Eventually I made my way over to the bond room, and then ended up over at the ‘Merc’. My partner and I built one of the world’s largest S&P 500 index futures operations. I have been part of every major stock market event since 1985, and while I have said many times the ‘I have seen it all,’ I have to be perfectly honest, I am not quite sure I can say that anymore.
I have known how zero borrowing costs stimulated the economy, and I understand the stock buybacks. This helped get the economy back on track, and helped the S&P triple in price since the March 2009 credit crisis lows. I also understand how the sell offs are just fuel for the upside, and I fully understand and follow the back and fill patterns in the S&P. I understand the positive effects of all the quantitive easing and the economic recovery, but the part I have never seen before, and what I think has been the cause of the upside acceleration in the S&P, is President Trumps initiatives. Like the president or not, we have never seen what we are seeing today, and the world, and the markets, are reacting in kind.
At just after 12:00 CT yesterday the ESM17 bounced off its 2373.75 low, rallied up to 2380.00, and then came back down. Here is what I said after the ESM17 made its early high at 2385.50:
IMPRO:Dboy:(9:59:57 AM) : still worried there could be another flush
IMPRO:Dboy:(10:00:28 AM) : everyone thinks we go up and we may but would not surprise we we drop at some point
And that’s exactly what happened. The futures dropped down to a new low at 2373.75, creating a 10 handle rule affect pushing the S&P’s 11.75 handles off the highs and then in the forum I said:
IMPRO:Dboy:(11:19:19 AM):filled on 75.75 bid
IMPRO:Dboy:(11:39:13 AM):getting a little extended from the vwap now
IMPRO:Dboy:(11:52:47 AM):looking for a move back to vwap
The S&P’s did find a low soon after my bid was filled and pushed back up to 2380.00, missing the vwap by two ticks. However, the midday rally fizzled out and led the future’s back down to retest the lows. The futures made a new low by one tick before reversing into the close and pushing back up to 2379.50. In the end, the day’s overall trade and volume were lower from Wednesday. With regard to the overall tone, the ES saw a series of failed rallis throughout the day, but closed firm.
While You Were Sleeping
Overnight, global equity markets continued to rise as nearly all Asian and European stock indices tracked higher. The S&P’s opened the globex session at 2379.25 and traded to an early 2380.00 high soon after the Tokyo open and then down to the 2375.25 low early after the Euro to trade in a quiet 4 handle range thus far. As of 5:55 am cst the last print is 2378.75, down a single tick, on volume of 85k.
In Asia, 9 out of 11 markets closed higher (Shanghai -0.96%), and in Europe 8 out of 11 markets are trading higher this morning (FTSE +0.24%). Today’s economic calendar includes the Quadruple Witching, Industrial Production, Atlanta Fed Business Inflation Expectations, Consumer Sentiment, Leading Indicators, and the Baker-Hughes Rig Count.
The March Quad Witch
Our View: Can you believe the there are only 11 trading days left in the first quarter? I can’t! Brexit and Trump’s election win doesn’t seem that long ago. That said the S&P has moved up substantially after both events, and while some people think we are nearing a high, I just don’t see anything that tells me anything has changed. Bottom line, the trend is your friend until further notice.
I hate saying this, but in the ‘old days’ the quarterly expirations used to be one of the busiest trading days of the year. It was full of hectic two way flow, big buying and big selling, but after the CME took the S&P (ES) online, it took the roar out of it. Now it’s just the hum of the computers and a lot of opening and closing volume with little in between. The S&P pit that used to house 500+ orderfiller, locals, and clerks, is now the only futures pit left in the world, and the 500 is down to less than 40 souls. The 20 year transition has been hard to watch, but it was also inevitable.
Our view; I know most people want to see a sell off, or some type of let down, but they are becoming increasingly rare. When it does happen the ES always ‘snaps’ right back. For the most part it really is a one sided trade. We think there could be a little biz in the first and last 45 minutes of the day and dead in between. We should see some type of sell off and then some type of bounce. You can take it from there.
PITBULL: CLK OSC -37/-17 turns down on a close below 4694, ESM OSC 7/11 turns down on a close below 236565, VIX OSC 2/1 turns down on a close below 1260.
Download all of the March expiration stats here
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 9 out of 11 markets closed higher: Shanghai Comp -0.96%, Hang Seng +0.09%, Nikkei -0.35%
- In Europe 8 out of 11 markets are trading higher: CAC +0.37% DAX -0.05%, FTSE +0.24% at 6:00am ET
- Fair Value: S&P -3.53, NASDAQ +3.17, Dow -51.56
- Total Volume: 377k ESH, 1.6mil ESM, 6.9k SPH, 6.2k SPM traded
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