There seems to be something going on in the S&P 500 futures (ESH17:CME). This something was happening long before Brexit, and long before Donald Trump won the US presidential election. When the PitBull asked me what I thought about the stock market, I reminded him of what he said to me in early 2007, before the word ‘credit crisis’ had even been mentioned. He said there was ‘rotten wood floating around in the stock market leaders, the banks and brokerage companies,’ and then told me ‘there is going to be an enormous shift of wealth out of the United States.’
I went on to say that the money that left is pouring back into the US markets, and that the shift is going to be one of the largest in history. Let’s face it, where do people invest their money? In China, or Russia? In the Middle East? Or how about Europe, or South America? No, that’s not where the big money is flowing, because it’s all flowing back into the US stock market, a safe haven amongst a sea of global economic problems.
It’s 1:45 CT, and after a small sell off on Globex and an early rally, the S&P futures are ‘dead in their tracks.’ For the last 4 hours the ESH17 has been stuck in a four handle (point) trading range. Total volume just turned 1 million contracts, but 180,000 of that volume came from Globex, pre-8:30 futures open. In the 5 1/2 hours of trade so far, that means only 74,000 lots per hour. When you take out the 65% for program, algo and high frequency trading, which comes to 48,000, that only leaves 26,000 per-hour for the retail and other types of trading, like hedge funds, banks and prop trading firms.
At the end of the day, it traded as an “inside day” on a trip to nowhere, but I think it can be counted as a win for the bulls. The FOMC minutes were unable to trend the market. What started off on the MiM as over $500 million to sell, ended up turning to the buy side, as the actual MOC came in at $350 million to buy. The S&P futures needed to create a floor at 2350, and it seems to be successful in doing so. The futures settled the cash session at 2361.00 up five ticks on the day.
While You Were Sleeping
Overnight, equity markets in Asia and Europe were mixed with little traction, but overall a slightly negative tone. The S&P 500 futures made an early low at 2359.00 and traded to a high at 2363.75 a couple hours into the Euro session. As of 5:47 am cst, the ESH has last printed 2361.75, up three ticks on the session, with volume at 70k.
In Asia, 6 out of 11 markets closed lower (Shanghai -0.30%), and in Europe 6 out of 10 open markets are trading lower this morning (DAX -0.09%). Today’s economic calendar includes Weekly Bill Settlement, Jobless Claims, Chicago Fed National Activity Index, Dennis Lockhart Speaks, FHFA House Price Index, Bloomberg Consumer Comfort Index, EIA Natural Gas Report, Kansas City Fed Manufacturing Index, EIA Petroleum Status Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 52-Week Bill Announcement, a 7-Yr Note Auction, Fed Balance Sheet, and Money Supply.
Barclays Fed Speaker Preview
Atlanta Fed President Lockhart (FOMC voter) speaks: Lockhart favors two rate increases in 2017 based on his outlook, which does not factor in any fiscal policy stimulus.
He would be open to more hikes, but does not see any urgency to hike rates now without knowing how details of fiscal policy may affect the outlook. Lacker retires from the Atlanta Fed at the end of February.
2375 On Tap
Our View: It’s hard to fight the tape right now. Bears are not being paid, and I have been saying that bulls who buy the open and walk away, or buy globex weakness, have been faring the best. Our target is now 2375. Sure, there could be some T+3 weakness going into the end of the month, but lately nothing has been able to hold the bulls back.
Market Vitals for Thursday 02-23-2017
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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 lower: Shanghai Comp -0.30%, Hang Seng -0.36%, Nikkei -0.04%
- In Europe 6 out of 10 open markets are trading lower: CAC +0.09%, DAX -0.09%, FTSE -0.11% at 6:00am ET
- Fair Value: S&P -1.85, NASDAQ +0.91, Dow -25.47
- Total Volume: 1.3m ESH and 4.4k SPH traded
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