With all the threats going back and forth between the U.S. and North Korea, one would think it would topple the markets, and maybe part of yesterday’s sell off had a little but to do with that, but the real reason for the weakness was the FAANG stocks. The weaker they got, the weaker the rest of the markets.
Big Stock Rotations
The total trading range on yesterday’s Globex session was 2494.75 to 2504.50, with 175,000 S&P 500 futures (ESZ17:CME) traded before the open. On the open, the first print was 2495.50, and after a little sideways price action, the ES traded up to 2500.00 just after 9:30 CT.
The problem for the S&P’s were the FAANG stocks (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google). As the FAANG stocks fell the ES traded back under 2500.00, and got hit by several sell programs that took the futures all the way down to 2485.00. I have to admit, on Globex Sunday night, I thought the ES was going to make new highs, but after falling off on Globex and all the early sell programs, I knew yesterday was not going to be the day.
After making the low, the ES traded back to 2492.00 at around 12:20 CT, and then traded one tick above the vwap at 2493.25. The other part of the weakness came from North Korean Foreign minister, Ri Yong Ho, speaking in New York on Monday, saying recent comments from President Donald Trump about North Korea are “clearly a declaration of war,” and said Pyongyang has the right to shoot down U.S. bombers.
Buy Russell, Dow And S&P / Sell Nasdaq
A little after 1:00 CT, the Nasdaq 100 futures (NQZ17:CME) sold off down to 5856.5, pulling the ES down to 2490.50, and then down to 2488.25 before heading back up to 2493.75. The MiM started off showing $291 million for sale, and then flipped to $260 million to buy. The actual 2:45 NYSE imbalance showed $290 million to buy, and the ES traded up to 2494.50 at 2:50 CT.
After 3:00, the ES traded up to 2497.50, down only 2.25 handles on the day. In the end the S&P 500 futures (ESZ17:CME) settled at 2497.00, down -2.50 handles, or -0.10%, the Dow Jones futures (YMZ17:CBT) settled at 22276, down -23 points, or -0.10%, the Nasdaq 100 futures (NQZ17:CME) settled at 5876.50, down -59.25 points, or -1.01%, and the Russell2000 (RTYZ17:CME) closed up +0.19% at 1453.70.
In the end, it was a gigantic rotation between all the indices.
While You Were Sleeping
Overnight, equity markets in Asia and Europe traded mixed, as traders seem to be trying to decipher the meaning of the weakness in tech stocks.
In the U.S., the S&P 500 futures opened last night’s globex session at 2498.00, and traded sideways in a 5.5 handle range from 2492.75 to 2498.25 for the rest of the night.
In Asia, 6 out of 11 markets closed lower (Shanghai +0.07%), and in Europe 7 out of 12 markets are trading higher this morning (FTSE -0.05%).
Today’s economic includes Redbook (8:55 a.m. ET), S&P Corelogic Case-Shiller HPI (9:00 a.m. ET), New Home Sales (10:00 a.m. ET), Consumer Confidence (10:00 a.m. ET), Richmond Fed Manufacturing Index (10:00 a.m. ET), State Street Investor Confidence Index (10:00 a.m. ET); Fedspeak — Loretta Mester Speaks (9:30 a.m. ET), Charles Evans Speaks (9:30 a.m. ET), Janet Yellen Speaks (11:50 a.m. ET), Raphael Bostic Speaks (12:30 p.m. ET); Earnings — IHS Markit (6:00 a.m. ET), FactSet (7:00 a.m. ET), Darden Restaurants (7:00 a.m. ET), Carnival (9:15 a.m. ET), Micron Technology (4:00 p.m. ET), Nike (4:15 p.m. ET), Cintas (4:15 p.m. ET), Toys “R” Us (PM).
Our View
I was off on my call yesterday, but I still think the S&P is going to new all time highs. As we have learned, it’s all about ‘thrust’, and that always builds up after a big down day, i.e. the Nasdaq. Like the PitBull said, it was all a big rotation, with the FAANG stocks taking the brunt of the beating. If you looked at the price action closely, the Dow, S&P and especially the Russell futures, all acted ok. I should have stuck with my call to sell the early rallies and buy weakness. Our view remains the same; buy weakness. I still think the ES is going to new highs.
Market Vitals for Tuesday 09-26-2017
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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 +0.07%, Hang Seng +0.05%, Nikkei -0.33%
- In Europe 7 out of 12 markets are trading higher: CAC -0.07%, DAX +0.06%, FTSE -0.05%
- Fair Value: S&P -2.59, NASDAQ +4.28, Dow -49.84
- Total Volume: 1.53mil ESZ & 445 SPZ traded in the pit
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