The (ESH17:CME) got off to a rough start yesterday with a big sell program on the 8:30 CT futures open. While we can’t say the future’s always ‘dip and then rip,’ we can say that’s how it works in most cases. What was a little different was how early the ES ‘bottomed’ and rallied so early. In most cases the ESH17:CME rallies in the first part of the day, and if you sell too early you get stopped out, but like I said to the PitBull today, if you just remain patient and wait for the European close you get a lot more bang for your buck. Yesterday’s drop and pop came fast, and I went right into the forum and said this:

IMPRO:Dboy:(11:05:39 AM) : ES .. rallied too early, see how it acts on the retest but with so much time I think we could see new lows

And that’s exactly what happened…

After selling off down to 2366.25, the ESH rallied quickly back up to the high of the day at 2374.75 around 10:15 ct. After that the futures dropped down to 2367.00, made a series of higher lows, and then traded up to 2372.00. Next, the ESH sold off a few handles, then made a lower high at 2371.75 as the MiM went from 140 mil to sell to 190 million to buy. After a few small drops several buy imbalances showed up just above the vwap at 2370.25, but the future got hit by a sell program going into the 3:00 CT cash close, and then dropped again going into the 3:15 futures close. As for the overall price action, it was one of failed rallies. In terms of the overall tone, volume was low, but the closing drop was not something we see very often.

At the end of the day the index futures markets have gone a long way in a short period of time. The markets are facing several important economic event this week and in the coming weeks. Next up is Mario Draghi and the ECBs interest rate decision, along with Chinese economic data, and then the US jobs report on Friday. Next week will be the Fed’s two day meeting on March 15 and 16, also the debt ceiling and the suspension of the limit expires on March 15 and has to be agreed upon by March 31, then there is the March Options Expiration on March 17.

The S&P’s are entering a period of weak historical stats. Is it time to lighten up? Are the markets going to reverse hard? I do not think so, but you also have to consider how far the ES has gone. What is a 2% or even 3% drop off the current highs? Yesterday the institutions were selling the Nasdaq 100 (NQH17:CME), and at times it looked like they were ‘rotating’ buying (YMH17:CBT) and the (ESH17:CME), but selling in the (NQH17:CME) late in the day overpowered both indices. On a scale of 1 to 10, 10 being the worst, I give yesterday’s sell off a 2.

While You Were Sleeping

Overnight global equity markets were choppy and mixed, but did have an overall lower tone. The S&P 500 futures were weak early in the globex session, trading down to a low of 2359.50 on the Tokyo open, but has since found a modest bid. The ESH has pushed back up to a session high at 2367.50 2 hours into the Euro session, and briefly went positive, but has since come off those highs. As of 6:10 am cst, the last print is 2365.25, down 1.25 handles, with volume of 135k.

In Asia, 6 out of 11 markets closed lower (Nikkei -0.47%), and in Europe 7 out of 11 markets are trading lower this morning (DAX -0.23%). Today’s economic calendar includes MBA Mortgage Applications, ADP Employment Report, Productivity and Costs, Wholesale Trade, EIA Petroleum Status Report, and a 10-Yr Note Auction.

PitBulls Thursday / Friday Low The Week Before The March Quad Witch

The S&P futures (ESH17:CME) have closed lower 4 days in a row, and has now fallen 36.50 handle from last Wednesday’s 2401 all time contract high. Are they breaking the mold? Is the ES going to tumble? It could, but we will still be looking for the PitBull’s ‘Thursday / Friday low’ the week before the expiration. It could get volatile in the coming days.

Our view: you don’t get too many 2 day selloffs, and 3-4 day selloffs are even more rare. Our view is to sell the rallies and buy weakness. The guys with the better seats took a rain check yesterday, but that doesn’t mean they won’t be back today.

Market Vitals for Wednesday 03-08-2017

[gview file=”https://mrtopstep.com/wp-content/uploads/2017/03/Market-Vitals-17.03.08.pdf”]

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

  • In Asia 6 out of 11 markets closed lower: Shanghai Comp -0.05%, Hang Seng +0.43%, Nikkei -0.47%
  • In Europe 7 out of 11 markets are trading lower: CAC -0.34% DAX -0.23%, FTSE -0.21% at 6:00am ET
  • Fair Value: S&P -0.28, NASDAQ +0.67, Dow +1.96
  • Total Volume: 1.3m ESH 100k ESM and 4.6k SPH 2.2k SPM traded

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