Over the last six weeks the S&P has continued higher but at a much slower pace. There was the June 27th Brexit 1981 low, then a big extended rally and now the S&P is inching higher, slowly but surely. Does this mean that the high maybe getting close or is the S&P doing a big ‘back and fill’ and getting ready to pop again? It’s hard to say but what’s not hard to say is that the S&P is less than 0.50% aways from S&P 2200.00. Will it make it? Well if you look at the net changes you will see that as the ESu16 has gone up over the last 34 sessions the rally is narrowing.
| Settlement | Net Change | |
| Friday July 1 | 2096.30 | +6.10 |
| Tuesday July 5 | 2082.75 | -13.5 |
| Wednesday July 6 | 2094.00 | +11.75 |
| Thursday July 7 | 2192.00 | -2.0 |
| Friday July 8 | 2120.50 | +28.50 |
| Monday July 11 | 2130.25 | +9.75 |
| Tuesday July 12 | 2145.75 | +15.50 |
| Wednesday July 13 | 2146.00 | +0.25 |
| Thursday July 14 | 2157.25 | +11.25 |
| Friday July 15 | 2152.75 | -4.50 |
| Monday July 18 | 2160.00 | +7.25 |
| Tuesday July 19 | 2158.75 | -1.25 |
| Wednesday July 20 | 2167.50 | +8.75 |
| Thursday July 21 | 2158.00 | -9.50 |
| Friday July 22 | 2167.50 | +9.50 |
| Monday July 25 | 2162.25 | -5.25 |
| Tuesday July 26 | 2163.25 | +1.00 |
| Wednesday July 27 | 2160.50 | -2.75 Last 17 days |
| Thursday July 28 | 2164.25 | +3.75 |
| Friday July 29 | 2168.25 | +4.00 |
| Monday Aug 1 | 2164.50 | -3.75 |
| Tuesday Aug 2 | 2152.75 | -11.75 |
| Wednesday Aug 3 | 2157.00 | +4.25 |
| Thursday Aug 4 | 2159.25 | +2.25 |
| Friday Aug 5 | 2176.75 | +17.50 Last 10 days |
| Monday Aug 8 | 2175.50 | -1.25 |
| Tuesday Aug 9 | 2177.50 | +2.00 |
| Wednesday Aug 10 | 2172.75 | -4.75 |
| Thursday Aug 11 | 2181.75 | +9.00 |
| Friday Aug 12 | 2180.25 | -1.50 |
| Monday Aug 15 | 2186.00 | +3.75 |
| Tuesday Aug 16 | 2176.75 | -9.25 |
| Wednesday Aug 17 | 2179.25 | +2.50 |
| Thursday Aug 18 | 2183.60 | +3.90 |
| 34 days average net change: | +6.9 handles |
| 17 day average net change: | +5.0 handles |
| 10 day average net change: | +4.9 handles |
| 34 day average down change: | -5.5 handles |
| 34 day average higher change: | +7.5 handles |
It’s astonishing to see that after a 210 handle rally in the S&P that the futures have gone from some big up 20 and 30 handle days to such small net changes. Maybe part of this is the S&P being over extended and overbought, but maybe it has to do with a weary public unwilling to put money into stocks after the big upside wash out from Brexit as the markets head into the end of August and the ‘spooky months’ of September and October. None of us should forget what happened on August 24th of last year when the DOW opened down 1000 points.
Yesterday was more of the same. The ESU making an early low at 2177.75 and then inching higher to grind up to 2184.25 before dropping again back to the low, and then rallying back to the high of day. No matter how many times the S&P looks weak, bears are not getting any follow through, not even modestly. However, bulls are not getting much momentum either, this market is for those willing to buy the 5 to 10 handle pullbacks and sit on it as long as necessary. These ranges have not been great for day trading, and the only ones winning are those who bought that post Brexit slow and are in holding pattern. Yesterday’s 8.25 range on the 24 hour chart was the quietest all summer, however, volume has remained above 1 million except for a single instance.
Overnight Asian markets were mixed as the ESU6 traded in a 3 handle range. When Europe opened, sellers were pushing the markets lower and this sent the S&P down to 2175.25, a 8 handle drop on the European open. After rallying back up to 2179.50 the contract now seems to be aiming for the overnight low. Today’s session offers nothing on the calendar other than the rig count, and with one of the last weekends of summer upon us, I would assume that many traders would leave the desk and enjoy the end of summer. If so, I expect today to be the slowest day of the year.
However, sometimes when the cats are away, the mice will play. With the ESU at August expiration, I expect for some book squaring to begin to end the summer. If the ESU breaks the 2175 support zone then I think we could see this week’s 2165 low and that would open up the best potential for follow through. The bulls need to push higher into the cash open and hold the bid firm early this morning, but I’m not sure they can.
In Asia, 6 out of 11 markets closed lower (Nikkei +0.36%), and in Europe 11 out of 12 markets are trading lower this morning (DAX -0.46%). Today’s economic calendar includes the Baker Hughes Rig Count.
Our view: Today is the August option expiration. Based on how the futures went out I still think higher prices just don’t know about breaching ES 2200.00. It been a slow boat to China recently and not sure today is going to change much either way. Today’s S&P cash study shows stocks being up 16 / down 16 of the last 32 occasions. The Monday after is even weaker, up 15/ down 17 of the last 32 occasions. So you have to be careful. Like I told the PitBull, 2193 is as close as it gets to ES 2200.00, and now we have to see how much fuel is left in the tank. Our view, Europe was weak overnight and the S&P has stutter stepped lower. It doesn’t look like we will see ES 2200.00 today. We want to get a look at the price action before we make any trades.
As always, please use protective buy and sell stops when trading futures and options.
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- In Asia 6 out of 11 markets closed lower: Shanghai Comp +0.13%, Hang Seng -0.37%, Nikkei +0.36%
- In Europe 11 out of 12 markets are trading lower: CAC -0.83%, DAX -0.48%, FTSE -0.27% at 6:30am ET
- Fair Value: S&P -2.13, NASDAQ -0.41, Dow -20.81
- Total Volume: 1.2mil ESU and 2.8k SPU traded
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