No matter how you look at it, Tuesday’s trade was excruciatingly slow. The S&P 500 futures (ESM17:CME) started to rally around 5:00 am, and continued the uptick right into the 8:30 CT futures open. The ES initially ‘double topped’ at the 2399.00 level, pulled back under the vwap at 2396.00, and then several buy imbalances showed up pushing the futures up to 2400.00 around 10:30.
After the high was made, the ES traded up and down through the vwap, and eventually got hit by a few small sell programs that pushed the ES down to 2392.00. For a good portion of the day the ES was stuck in a 5 handle range. The Nasdaq 100 futures (NQM17:CME) were firm all day, and at times lent support to the ES, but the late day headlines about North Korea saying they are preparing for an underground nuclear test pushed the ES down 4 handles right away.
Look, I am going to say it like it is. On Monday CNBC had a panel of talking heads saying that the VIX is actually a worthless indicator. In my mind, that is not only ridiculous, but it shows how complacent the public has become. The VIX has a long history of catching people off base, and while the reaction to the North Korean headlines did not move the S&P much, that doesn’t mean it will not move sharply after the nuke test. Additionally, there is another VIX wild card, President Trump. The news says Trump will not do anything, but I think trying to predict him is as stupid as saying the VIX doesn’t work. The last time the VIX fell under 10 was in 2014, and after that, it rallied 150% over the next two months. So, if you want to play with fire, just sell the VIX.
All in all, it was another slow day on a list of many. In regard to the ES’s overall tone, it felt like it was a ‘sell the news’ day. In terms of the day’s overall trade and volume, it was dead. If not for the late day headlines, the ES would have been hard pressed to do over 1 million contracts.
While You Were Sleeping
Overnight equity markets in Asia were mixed but mostly higher, followed by Europe with an overall choppy and lower tone. In the U.S. the S&P 500 futures opened the globex session at 2391.25 and then traded down to 2387.50 just after the Tokyo open. From there, the ESM traded sideways before rallying up to a session high of 2392.00 on the European open, but then fell back down to 2387.50 again. As of 7:15 am cst the last print in the ES is 2391.50, down 1.75 handles on the day, with 135k contracts traded.
In Asia, 6 out of 11 markets closed higher (Shanghai -0.93%), and in Europe 9 out of 12 markets are trading lower this morning (FTSE +0.28%). Today’s economic calendar includes the Bank Reserve Settlement, MBA Mortgage Applications, Import and Export Prices, Atlanta Fed Business Inflation Expectations, EIA Petroleum Status Report, Eric Rosengren Speaks, a 10-Yr Note Auction, Neel Kashkari Speaks, and Treasury Budget.
Our View
It’s always a tough go at the ‘big figures’ (ES 2400.00.) Like I said Monday, the French election caused a big short squeeze. Another part was that everyone went from short to long into the rally. That’s not good the first time up. The ES is deserving of a 20 to 30 handle pull back. Will it get it? Yes, if the North Koreans do the nuke test, we will for sure.
Our view; 2388 was a level I was looking at during yesterday’s day session. I told the forum I wanted to buy under 2390, and the early Globex low is 2388.75. My gut says there will be some type of ‘pop and drop’. You can take it from there…
Market Vitals for Wednesday 05-10-2017
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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 -0.93%, Hang Seng +0.51%, Nikkei +0.29%
- In Europe 9 out of 12 markets are trading lower: CAC -0.16%, DAX -0.06%, FTSE +0.28%
- Fair Value: S&P -3.14, NASDAQ -3.94, Dow -44.18
- Total Volume: 1.1 m ESM and 3.4 k SPM traded
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