S&P 500 Futures, Deutsche Bank and the US Presidential Debates

S&P 500 Futures, Deutsche Bank and the US Presidential Debates

The S&P 500 futures traded higher initially during Sunday night’s globex session but started to sell off soon after the Tokyo open at 7:00 pm cst. The headlines started hitting the tape after it was reported that German Chancellor Angela Merkel told Deutsche Bank CEO John Cryan that she wouldn’t offer political assistance to the giant lender as it faces the prospect of a $14 billion fine from the U.S. Justice Department. This sent the S&P lower before and after the 8:30 ct futures open. The first print after the opening was 2147.50, the total Globex range was 2144.25 – 2159.50, with 220,000 contracts traded overnight.

The open was followed by one sell program after another. An early low of 2141 was made in the first half hour trading. When the follow up rally failed just above the open at 2149.50, sell programs once again took the ESZ16 back down to 2136.50 just before the close, on an MOC of $580 million to sell. Ultimately, the futures did pop in the last few minutes of trade, but closed just a couple handles off the lows at 2140.00, down 19.5 handles on the session, or .85%.

T+3 & TurnAround Tuesday

It was a bad start to the week. The DJIA finished with its first consecutive triple digit losing day since the two days following Brexit. The historical stats don’t look good for the last week of Q3. The Stock Trader’s Almanac shows that 14 of the last 18 years the last day of Q3 closed lower. Combine this with the conclusion of the OPEC meeting on Wednesday, along with a lot of Fed speak this week, the market reaction to new post debate polls soon, and the market could retain quite a bit of volatility and uncertainty over the next several sessions.

Today will begin some of the T+3 action. Funds will unload securities that will clear in enough time to potentially be put to work in Q4. Last week Lipper Fund Flows report showed the largest outflow of equities since the Brexit reaction, and with the S&P still near all time highs, there could be more money to go out than in. Also, last Friday the NY Fed lowered expectations of the Q3 GDP to 1.3%, and it could go lower. The expectation of weak data and the continued weakness of Deutsche Bank has to be somewhere in the markets mind. In 2008 these wise ones knew what the rest of us learned, it’s never limited to one single event.

Globex & The Market Reaction To First Debate

Overnight the feature was the U.S. Presidential debate.  It’s likely that all the markets needed was Hillary Clinton to show up to start rallying. Just before the debate the ESZ dropped 6 handles to 2133.25. As the debate started the S&P’s mounted a comeback, rallying up to 2154.00, a 20+ handle rebound before double topping there again on the Euro open. While Asian markets were mixed to higher, Europe opened with an offer and this helped take the spoos back lower as Deutsche Bank stock was hitting a new low.

European markets are all lower this morning. The ESZ traded from the 2154.00 high down to 2140.75, back near unchanged, after such an eventful night. The benchmark futures did bounce back to 2146.25 this morning, but found resistance there. Currently the ES is heading lower while total volume is approaching 250K. Today offers some economic releases which are more noticeable, but it’s possible that the S&P trades inside the overnight range.

In Asia, 6 out of 11 markets closed higher (Shanghai +0.60%), and in Europe 11 out of 11 markets are trading lower this morning (DAX -0.77%). Today’s economic calendar includes Redbook, S&P Case-Shiller HPI, PMI Services Flash, Consumer Confidence, Richmond Fed Manufacturing Index, State Street Investor Confidence Index, a 4-Week Bill Auction, and a 5-Yr Note Auction.

Our View

It’s 7:00 am cst and the ESZ6 is last trading at 2144.50, up 4.75 handles, on total volume of 243K. The overnight range was over 20 handles with some large swings. This morning’s calendar features a couple of important releases. The globex bounce was off the same price area that the S&P traded just before the FOMC rally last Wednesday, and the intraday chart looks like it’s made and is trying to hold a higher low. Levels we are watching are the 2154 globex double top and the 2132-2135 area which was the overnight low of the range before the Fed rally last week. Our call is to sell the rally up to 2154 and/or buy weakness down to 2135-2130.

S&P 500 Futures and the Presidential Debate Decline

As always, please use protective buy and sell stops when trading futures and options.  

• In Asia 6 out of 11 markets closed higher: Shanghai Comp +0.60%, Hang Seng +1.09%, Nikkei +0.84%
• In Europe 11 out of 11 markets are trading lower: CAC -0.50%, DAX -0.77%, FTSE -0.22% at 6:00am ET
• Fair Value: S&P -7.47, NASDAQ -7.11, Dow -93.03
• Total Volume: 1.6mil ESZ and 5.7k SPZ traded

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