If you read yesterday’s Opening Print, then you know that we thought the bus was too full going into the 8:30am CT open, and it turned out we were right… At least for a little while.
After another uninspiring 6 handle range during the Globex session, stocks broke out of their shells just after 7:30am, and started making some new lows. When the 8:30am bell rang, the S&P 500 futures (ESU17:CME) opened up at 2452.00, down -6.5 handles, and the Nasdaq 100 futures (NQU17:CME) opened at 5836.50, down -18.50 points.
After an early low was established at 2450.00, the ESU rallied back to 2454.75, then, just after 9:00am, sellers came rushing in and broke the futures down to a new low at 2448.0. The Nasdaq followed suit, but was a little bit stronger than the S&P, making a low at 5820.25 on the open, then trading higher without a retest. By 10:00am, both markets had recovered, and were trading above their opening ranges. From there, the ES traded in a 4 handle range from 2452.00 to 2456.00.
As the day wore on, the ES just ground higher, and at 2:35 CT had made its way all the way up to 2458.50. Total volume (despite the early sell off) was just under 1 million contracts. The MiM started to show $200 million to buy early on, and increased to $460 million to buy just before the 2:45 cash imbalance reveal. The final MOC was buy $620 million, but it had little effect on the market.
In the end, the S&P 500 futures (ESU17:CME) settled at 2457.75, down -0.75 handles, or +0.03%, the Dow Jones futures (YMU17:CBT) settled at 21520, down -61 points, or down -0.28%, and the Nasdaq 100 futures (NQU17:CME) settled at 5882.75, up +27.75 points, or +0.47%.
While You Were Sleeping
Overnight, equity markets in Asia traded mostly higher, led by the Shanghai Composite, which closed up a whopping +0.42%. Meanwhile, in Europe, markets are trading mixed as investors await more earnings news.
In the U.S., the S&P 500 futures opened last nights Globex session at 2459.75, and was held to a mere 3.25 handle range. The low at 2457.75 was made just after the open, and the high at 2461.00 was made not long after Asian markets opened. Neither the high nor the low was ever seriously tested, in what turned out to be a very flat overnight trading session.
In Asia, 10 out of 11 markets closed higher (Shanghai +1.42%), and in Europe 6 out of 12 markets are trading higher this morning (FTSE +0.01%). Today’s economic calendar includes the Bank Reserve Settlement, MBA Mortgage Applications, Housing Starts, and the EIA Petroleum Status Report.
Our View
In Yesterday’s Opening Print the theme was “too high to buy but too firm to sell,” and after a small early pullback that was bought up and pushed to just two ticks from all time highs, we find ourselves in the same place once again.
In the last few months, the pattern has been to extend the prior all time high by about 10 handles, and then back and fill for several weeks. While we don’t want to short this market with conviction or large size, we do recognize the water in the bathtub pattern suggests more dips to buy, but sometimes they just don’t come.
The levels we are watching to the downside for support are 2454, 2450 and strong support at the 2445 – 2440 area. To the upside we are looking at 10 handles above the high at 2471.50, and the 23.6% extension from last week’s range at 2473.25 as a target area. We think the 2473.25 area is a good place to potentially short with small size.
Our view remains the same; buy the early dips with conviction, and if you must short, then do so at the midday rallies, and with smaller size.
Market Vitals for Wednesday 07-19-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 10 out of 11 markets closed higher: Shanghai Comp +1.42%, Hang Seng +0.56%, Nikkei +0.10%
- In Europe 6 out of 12 markets are trading higher: CAC +0.08%, DAX -0.02%, FTSE +0.01%
- Fair Value: S&P -2.53, NASDAQ +1.27, Dow -49.68
- Total Volume: 1.0mil ESU, and 800 SPU traded in the pit
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