People aren’t saying much about it, but the Dow Jones Industrial Average (DJIA) has closed lower three weeks in a row. The S&P has been down two weeks in a row, and is working on a third straight drop. The PitBull told me almost two weeks ago that the Dow Jones Transports (DJTI) were weak, and over the last several days the index has fallen close to correction territory, taking the S&P for the ride lower. Yesterday the S&P 500 futures (ESM15:CME) shook off part of that weakness and closed up 1.90 handles higher, or +0.04%, literally unchanged on the day. The Dow Jones futures (YMM15:CBT) closed down 1 point, or -0.01%, and the Nasdaq futures (NQM15:CME) fell .075 points, or -0.15%. The S&P futures (ESM15:CME) sold off hard early in the day, double bottomed at the 2071.25 level, and then rallied. This seemed to set up the rest of the day that saw the S&P futures uptick late in the day only to get hit by weakness, which we saw early in the MiM (MrTopStep Imbalance Meter).
When so many people jump on the short side so late in the day, there is a tendency for a bounce. Overnight, both Asia and Europe firmed up. I have stated my position many times that the S&P might be wallowing right now, but is going to head back above 2100 with strength. I am backing it up today with some specific events that may trigger that rally. This week is the PitBull’s Thursday/Friday low the week before the expiration, which tends to be followed by a rally during options expiration week (next week). Moreover, the S&P cash study shows that the June Quad Witching usually sees an uptrend. Eventually the S&P will give way to the downside, but not this month. I still believe the markets will get past the expiration, though I am concerned about the Q2 rebalance at the end of this month, which may throw a lot of volume and volatility into the mix.
See all of the expiration stats here.
I have stated my case and I am sticking with it. The ESM15 is going up. It just has to do a bunch of u-turns and get everyone nice and short before it goes back up again. What do you think the increased volume is about? That can be answered in two words: short sellers.
In Asia 6 out of 11 markets closed higher, and in Europe 9 out of 10 markets are trading higher this morning. Today’s economic calendar starts out with MBA Mortgage Applications, Quarterly Services Survey, EIA Petroleum Status Report, 10-Yr Auction, and Treasury Budget.
Our View: Yesterday, Treasury yields traded up to an 8-month high. If you want volatility just go trade some bonds. Trading the bonds has always been considered slower and less painful, with a lot less algorithmic trading going on. But that is history. Sure the ES sold off and rallied but there are a lot of other things you can be trading, like crude oil, which went from $57.00 to $60.00 yesterday. That said, once an S&P junkie, always an S&P junkie. I said yesterday that the ESM is going back to 2100 and it looks like it’s on its way. Sell rallies and buy weakness or just sit back, let the ES sell off and look for a good stop to buy it. If I am right, the ES should get back to 2106-2108.
“S&P 500 Futures; Get Ready for the RIP Back to 2100”
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- In Asia 6 of 11 markets closed higher : Shanghai Comp.-0.15%, Hang Seng -1.12%, Nikkei -0.25%
- In Europe 9 out of 12 markets are trading higher : DAX +1.06%, FTSE +0.32%, MICEX -0.59% , GD.AT -0.31% at 5:30 am CT
- Fair Value: S&P -1.07 , Nasdaq -0.68 , DOW -9.37
- Total Volume: 1.44mil ESM and 6k SPM traded
- Economic calendar: MBA Mortgage Applications, Quarterly Services Survey, EIA Petroleum Status Report, 10-Yr Auction, Treasury Budget..
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