DJIA Up 6 Weeks In A Row
The Dow Jones futures (YMH17:CME), which posted its sixth consecutive week of gains, closed down 8 points on Friday. The dollar rose to its highest levels in a year, bond yields rose, and crude oil rallied to 52.03, up $1.13. Last week the Fed raised interest rates for the first time in a year and signaled more rate hikes to come in 2017. As for the S&P (ESH17:CME) and Nasdaq (NQH17:CME) futures, the S&P futures closed the week unchanged while the S&P cash was less than a handle lower for the week, and the Nasdaq rose for the fifth time in six weeks, closing the week up .50%.
Friday’s trade was almost one direction for the S&P 50 futures. The index opened the cash session at 2261.50, up three handles, but went offered for much of the day after trading to an early low of 2262.75. The ES grinded lower to a 2252.75 morning low, then bounced to 2258.75 midday before selling off again in the afternoon down to 2249.50. The futures closed the session off the lows at 2255.25, down 3.25 handles, 7.50 handles off the high, but 5.75 handles from the low.
While You Were Sleeping
Overnight equity markets were mostly weaker worldwide. The S&P 500 futures rallied up to 2259.50 on the globex before trading sideways for much of the session, printing a high of 2260.75 late in the Asian session, and then a low of 2257.00 early after the European open. The ES last printed 2257.50, up 2.25 handles on the day, with volume at just 57k as of 6:22 am cst this morning.
Get Your Free Lunch
Jeffrey Hirsch of Stock Traders Almanac points out what he coins as the “free lunch strategy” for short term traders. As we get closer to the end of year, many portfolios tend to dump the weaker stocks from this year for tax benefits, often times pushing these equities down to cheap levels. According to Hirsch: “Our research has shown that NYSE stocks trading at a new 52-week low on or about December 15 will usually outperform the market by February 15 in the following year. We have found that the most opportune time to compile our list is on the Friday of December triple witching.”
Asia and Europe
In Asia, 9 out of 11 markets closed lower (Nikkei -0.05%), and in Europe 7 out of 11 markets are trading lower this morning (DAX +0.02%). This week’s economic calendar features 18 reports, one Fed speaker and 13 U.S. Treasury bill/note events. Today’s economic calendar includes PMI Services Flash, a 4-Week Bill Announcement, a 3-Month Bill Auction, a 6-Month Bill Auction, and Janet Yellen Speaks.
From Barclays:
Federal Reserve Chair Janet Yellen: Yellen will give a commencement address at the University of Baltimore. Titled “The State of the Job Market,” the speech will likely address the job prospects of new graduates. Although the speech will likely avoid direct monetary policy discussion, her expectations of this age group’s prospects could shed light on her evolving views with regard to overall US labor market slack.
Our View:
As the holidays approach the markets should start to slow. We will start seeing smaller trading ranges and lower volumes. Despite having an active economic calendar this week, it should be quiet. With the Dow futures (YMH17:CME) up 6 weeks in a row, and the fed meeting and December options expiration now in the rear view mirror, it may be time to start thinking about some type of pull back before the Santa Clause rally the week after Christmas.
The S&P cash study shows the S&P up 16 / down 16 of the last 32 occasions. The PitBull said last week that he thought we could see the start of a small pull back this week, and I agree, we just have to get past ‘Mutual Fund Monday.’ Our view is to sell the early rallies and buy weakness keeping in mind we think we could see lower prices throughout the week.
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 -0.16%, Hang Seng -0.85%, Nikkei -0.05%
- In Europe 7 out of 11 markets are trading lower: CAC -0.16%, DAX +0.02%, FTSE +0.12% at 6:00am ET
- Fair Value: S&P -5.03, NASDAQ +0.72, Dow -61.09
- Total Volume: 1.4m ESH and 9.0k SPH traded
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