Yesterday’s price action resembled much of the rest of the week. The S&P opened the cash session at 2270.75, down 3.5 handles, pushed down to 2266.75 to make an early low underneath Wednesday’s low, and then traded sideways to higher for the remainder of the session. The futures traded up to 2279.75 to reach the high just after 10:00 am cst, and from there chopped several times between 2270-2277, but couldn’t get any real traction for the day’s trade.
The market-on-close imbalance final report at 2:50 came in just over $1 billion to buy, as money that exited equities starting last Friday is being put back to work going into the new month. This week’s economic calendar is just about completed, and despite all the heavy events, the S&P’s have been quiet, with the exception of the gap lower open Sunday night on globex. As I write this the S&P’s are trading just under 2280. The RTH high of the week is 2285.00, the globex high was Sunday night at 2285.75, and the globex open for the week was 2282.00, while the RTH open for the week was 2281.00.
At the moment it seems that the S&P’s could go either way with non-farm payrolls. Most of these economic reports have been quiet over last few months, and it doesn’t look like the NFP will cause a 25 handle dip and reverse today. However, bulls are in position to attack the highs of the week then go after the gap close, which is located around 2289, and from there could push above 2290 and actually close the week positive.
Remember, we look at the open of each daily bar, but also the close, and this week the close should be as important as the open, if not more. The bears made a 2262.25 low early this week and bottomed out between 2262-2268 everyday. A push to close just below 2260 wouldn’t be a huge victory for bears in the larger picture, but in the shorter time frame, would at least seem like something.
For now, the water in the bathtub trade continues between 2265-2280, and fading the edges has been the key. The daily closes have been 2276.25, 2277.25, 2274.75, and 2274.25 this week. We all know where the pain trade will be, where no one wants this market to close this week.
While You Were Sleeping
Overnight, equity markets in Asia were all open for the first time in over a weak, and most of the markets traded modestly higher, however, the Shanghai reopened lower. Europe followed with a moderate bid as all major markets are tracking higher this morning. The S&P 500 futures traded down to an early low at 2270.50 in the Asian session, and from there bounced up to 2280.50 just a few minutes ago. As of 5:58 am cst the S&P’s last printed 2279.50, up four handles on the session, with volume at 86k.
In Asia, 7 out of 11 markets closed higher (Shanghai -0.60%), and in Europe 10 out of 11 markets are trading higher this morning (FTSE +0.52%). Today’s economic calendar includes the Employment Situation, Charles Evans Speaks, PMI Services Index, Factory Orders, ISM Non-Mfg Index, and the Baker-Hughes Rig Count.
Barclays Capital Fed Speaker Preview
Chicago Fed President Evans (FOMC non-voter) speaks: We expect President Evans to reiterate that expansionary fiscal policies may provide a boost to economic activity, depending on the details, and could reduce the need for monetary accommodation.
We think he is likely to say that the economy is near full employment and that fiscal expansion is likely to provide only a short term boost unless it is accompanied by structural improvements in productivity. In previous remarks, Evans said two rate hikes this year would be reasonable and three hikes “not implausible.”
*Times reported are local NY time.
Our View
The non-farm payroll number ranges from 160,000 to 230,000. I think the number will come in on the low end. Whether you like the S&P or not, it’s again doing what it does best; it’s back and filling again. Additionally, the ES has made a series of higher lows.
It’s 6:45 CT and total volume in the S&P futures (ESH17:CME) is 100,000 contracts traded. MrTopStep has a trading rule called ‘Counter Trend Friday’. Basically the rule says to fade a big jump or drop after the jobs number is released, but over the course of the last several jobs numbers, volume has been too low to make the trade. Our view is to get past the jobs report, get a look at the price action, and buy weakness using tight stops.
Market Vitals for Friday 02-03-2017
[gview file=”https://mrtopstep.com/wp-content/uploads/2017/02/Market-Vitals-17.02.03.pdf”]
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets closed higher: Shanghai Comp -0.60%, Hang Seng -0.24%, Nikkei +0.02%
- In Europe 10 out of 11 markets are trading higher: CAC +0.83%, DAX +0.26%, FTSE +0.52% at 6:00am ET
- Fair Value: S&P -4.51, NASDAQ -3.84, Dow -72.02
- Total Volume: 1.4m ESH and 4.8k SPH traded
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