The S&P goes up and the S&P goes down, or at least thats what its been doing lately. The S&P futures closed down 18.25 handle on Monday, up 23.00 handles on Tuesday, up 10.50 handles on Wednesday, and down 15.00 handles yesterday. Despite the recent push higher there is still a lot of risk floating around in the stock market. When I spoke to the S&P desk on the CME floor, one trader said ‘there was a lot of chatter’ floating around that the S&P futures (ESZ16:CME) were acting funny. After that the headlines started hitting the tape that some large institutions and funds that clear Deutsche Bank had withdrawn some excess cash and positions held at the bank. That was all the indices needed to hear.
The ESZ16 that made a high at 2165.75 then sold off all the way down to 2137.25, a 25.75 handle drop. At its low the Dow Jones futures (YMZ16:CME) was down over 200 points. The Nasdaq 100 futures were down 55.75 points, or -1.18%, at its low. Crude oil futures (CLX16:NYM) were all over the place, trading as high as $48.32 around 11:30 CT, and then sold off down to close at $47.75, up .70 on the day. Gold futures (GCZ6:CMX) traded quietly in a $10 range closing, up. 30, at $1324.00.
We think it’s fair to say that when the VIX trades at or under 12, it doesn’t take much to shake up the markets. I don’t necessarily watch the VIX everyday, but when its trading under 12.00, I am always on guard. You have to be, just like yesterday when the Deutsche Bank headlines hit, the news algos were way ahead of the public. It makes it hard to have an opinion when outside influences hit the tape like they have been doing.
Stock Trader’s Almanac
September’s last trading day is also the last trading day of Q3. This makes it prone to last-minute portfolio restructuring that has frequently resulted in broad market declines. Over the last 21 years (1995-2015), the S&P 500 has advanced just 28.6% of the time on the last trading day of Q3. Solid advances in 1999, 2001, 2008 and 2015 help lift the day’s average performance to a mild 0.1% loss. Excluding those years, the average loss is 0.75% for the S&P 500. NASDAQ’s record is the same, while DJIA has managed to eke out one additional gain.
While You Were Sleeping
Overnight equity markets were weak in Asia. That offer continued during the European session as Deutsche Bank shares in Europe hit a new low and was down 8% at one point in the session. The S&P 500 futures traded lower through most of the night after gapping lower on the open. A low was finally made a 2135.75 low just after the Euro open, down 12 handles, before mounting a rally from there back to positive territory. Currently the ES is trading at 2149.50, a 14 handle rally, with volume at 208K at 6:02 am cst.
In Asia, 8 out of 11 markets closed lower (Nikkei -1.46%), and in Europe 11 out of 11 markets are trading lower this morning (DAX -1.34%). Today’s economic calendar includes a 2-Yr Note Settlement, a 2-Yr FRN Note Settlement, a 5-Yr Note Settlement, a 7-Yr Note Settlement, a 10-Yr TIPS Settlement, Personal Income and Outlays, Chicago PMI, Consumer Sentiment, Baker-Hughes Rig Count, and Rob Kaplan Speaks.
Last Call for the 3rd Quarter
Our View: Take out the Deutsche Bank news and the S&P is probably not be going down like it has been over the last few days. Yes, there have been a few updates, but it’s clear the futures have been on the offensive. Today is the last call for September, and it’s my call (for at least part of the day) we see higher prices. Our view is to sell the early rallies and buy weakness. As I told the PitBull, Deutsche Bank is not Lehman.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed lower: Shanghai Comp +0.21%, Hang Seng -1.86%, Nikkei -1.46%
- In Europe 11 out of 11 markets are trading lower: CAC -1.57%, DAX -1.34%, FTSE -1.17% at 6:00am ET
- Fair Value: S&P -7.28, NASDAQ -7.34, Dow -96.32
- Total Volume: 2.3 mil ESZ and 4.5k SPZ traded
[s_static_display]
No responses yet