Well, the cat is out of the bag. After 10 years of QE the fed is finally saying it’s time to pay back the piper. The best estimate is that the fed has racked up a $450 trillion balance sheet by paying back $10 billion pre-month. If you do the math, that means the pay back will take 37.5 years, or 450 months. During the feds Q&A, Yellen said the Fed would resume QE only if outlook for output deteriorates – not inflation.
As for yesterday’s trade, the ES traded 2506.00 on the open, traded up to 2507.25, sold off down to 2502.50, and basically traded in a 4.25 handle until the fed headlines hit the tape. After the headlines at 1:00 the S&P 500 futures (ESZ17:CME) sold off down to 2499.50, bounced back up to 2503.50, made a higher low at 2500.00, bounced back up to 2503.00, and then got hit by a big sell program that pushed the futures down to 2494.00.
After the low, the ES ‘popped and dropped’ a few times, and then in came the buy programs pushing the ES up to the vwap at 2502.75. From there, the ES pulled back down to 2499.50, and then shot up to 2506.75 after the 2:45 cash imbalance showed a NYSE closing imbalance of $1.647 bil to buy. Just before 1:00 there was only 570,000 ES traded, including the 116,000 from Globex, but at 3:05 total volume had jumped to 1.2 million.
MOC Buy $1.65 Billion
In the end, there was a good short sale after the fed headlines, but the best trade of the day came from buying the dip / weakness after running the sell stops. It took most of the day to knock the S&P down down to its low, and less than two hours to run the ES back up. With the $1.6 billion to buy MOC it looks like the guys with the better seats knew all along what was going to happen. Knock the stock market down to buy cheap inventory.
When it was all over, the S&P 500 futures (ESZ17:CME) settled at 2505.25, up +0.50 handles, or +0.01%, the Dow Jones futures (YMZ17:CBT) settled at 22376, up +40 points, or +0.17%, and the Nasdaq 100 futures (NQZ17:CME) settled at 5978.50, down -18.75 points, or -0.31%.
While You Were Sleeping
Overnight, equity markets in Asia traded lower, led by the ASX 200, which closed down -0.94%. Meanwhile, in Europe, stocks are currently trading higher this morning, with the CAC leading the charge at +0.54%.
In the U.S., the S&P 500 futures opened last night’s globex session at 2505.00, and were held to another tight 4.5 handle range overnight. As of 7:00am CT, the last print in the ES is 2504.00, down -1.25 handles, with 116k contracts traded.
In Asia, 9 out of 11 markets closed lower (Shanghai -0.23%), and in Europe 10 out of 12 markets are trading higher this morning (FTSE -0.05%).
Today’s economic includes Jobless Claims (8:30 a.m. ET), Philadelphia Fed Business Outlook Survey (8:30 a.m. ET), FHFA House Price Index (9:00 a.m. ET), Bloomberg Consumer Comfort Index (9:45 a.m. ET), Leading Indicators (10:00 a.m. ET), EIA Natural Gas Report (10:30 a.m. ET), Fed Balance Sheet (4:30 p.m. ET), Money Supply (4:30 p.m. ET), Fed Balance Sheet (4:30 p.m. ET), Money Supply (4:30 p.m. ET).
The Guys With The Better Seats Had This One
Our View: Being a seller in the S&P is not an easy game. If you are not willing to get in and get out, you get run over, which was the case yesterday. Despite the sell programs, and sell stops, there was another game plan, and that was the guys with the better seats showing up with $ 1.65 billion in stock to buy on the close. Clearly that buying was the reason the ESZ jumped so much late in the day.
PitBull: CLX osc 15/9 turns up on a close above 50.89; ESZ osc 28/20 turns up on a close above 2521.12; VIX osc -15/-8 turns down on a close below 9.39.
Market Vitals for Thursday 09-21-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 9 out of 11 markets closed lower: Shanghai Comp -0.23%, Hang Seng -0.06%, Nikkei +0.18%
- In Europe 10 out of 12 markets are trading higher: CAC +0.54%, DAX +0.30%, FTSE -0.05%
- Fair Value: S&P -2.32, NASDAQ +6.41, Dow -45.08
- Total Volume: 1.2mil ESZ & 584 SPZ traded in the pit
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