Thursdays selloff did one thing, it got traders short going into a statistically positive December options expiration. A lot of people that say they don’t believe in the ‘stats’, I walked Jeff Hirsch on to the CME Group trading floor a few years ago to meet Rick Santelli, and I remember Rick shrugging his shoulders about meeting Jeff and saying he didn’t believe in that ‘stuff’. While I don’t claim statistics are perfect, I do believe what happened Thursday was indeed a good example of when they do work. Sure, the markets got a boost over the likelihood of a tax overhaul passage, but we think the markets were set to go up either way, and the last minutes tax concessions didn’t hurt. Additionally, on the economic side, Labor Department data showed nonfarm payrolls jumped to a record 86th consecutive month, while the unemployment rate held at a 17-year low.
The way we read the move is, Thursdays weakness got people short. After a weak close and a push lower on Globex, the dollar and overseas stocks struggled off uncertainty over the U.S. tax overhaul. After the ES made the Globex low, it started to short cover, and at 7:30 am it had traded all the way up to 2667.75.
Friday’s trade started with 235,000 (ESH18:CME) futures traded before the 8:30 open. The first print came in at the Globex high, and then the futures rallied up to 2669.00. There was one small pullback down to 2666.00, and then the ES started hitting out buy stops and running buy programs up to 2675.50. After another small pullback down to 2670.50, another wave of buy programs pushed the futures up to a new all-time contract high at 2678.25 at 10:36. From the globex 2651.75 low to the high the ES rallied 31.5 handles.
After another small pullback down to 2675.00, the ES rallied up to another new high at 2679.00, and then back and filled for the next hour before popping up to 2681.25 and then up to 2682.25, up 29.50 handles or +1.10%. Before 2:00 CT the MiM went from $1.4 billion to buy to $1.6 billion to buy, to over $2 billion to buy. After another small dip the ES made another new high by 2 ticks at 2682.75, then sold off down to 2674.25 as the MiM temporarily paired back its buys, and then BLASTED back up to the highs at 2682.75 on the 3:15 futures close.
In the end it was an amazing day of little to no pullbacks, and a total pain game for the short sellers. If you came in short, or sold on the way up, you got faced. We have seen a lot of big rallies, but Fridays was a ‘Coup De Gras’. The S&P 500 futures (ESH18:CME) settled at 2682.00, up +26.00 handles, or +0.96%; the Dow Jones futures (YMH18:CBT) settled at 24,677, up +120 points, or +0.48%; the Nasdaq 100 futures (NQH18:CME) settled at 6498.50, up +89.50 points, or +1.37%; and the Russell 2000 (RTYH18:CME) settled at 1536.60, up +25.30 points or +1.64% on the day.
As always, please use protective buy and sell stops when trading futures and options.
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- In Asia 7 out of 11 markets closed higher: Shanghai Comp +0.07%, Hang Seng +0.70%, Nikkei +1.55%
- In Europe 12 out of 12 markets are trading higher: CAC +1.15%, DAX +1.40%, FTSE +0.46%
- Fair Value: S&P +2.86, NASDAQ +21.00, Dow +12.91
- Total Volume: 1.4m ESH & 622 SPH traded in the pit
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ybang
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Any decision to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
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