It’s getting harder and harder to deny. The S&P is up over 230% from the March 2009 ‘credit crisis low, up 17% from its June 23 Brexit vote ‘limit down’, and up 15% from the November Trump election week win.
Last week was another good example of the of how the overall price action of the S&P works; make a new high, sell off a little, back and fill, and then rush higher. There is no denying the S&P right now, and it has clearly established itself as the world’s leading stock market index. Right now it looks like there is no end in sight for this rally.
I could do all the ups and down of last Friday’s trade, but why? The S&P futures have been moving higher, and have not had a -1% pull back in 75 sessions. It has become so one sided that many futures traders have cut back and are now waiting for the ‘big’ sell off that never seems to come.
On Friday I sold the ES, the futures went 2 handles my way, and then 3 handles against me. After I put the trade on and watched it sell off a little, and then watched it move back up, I had to ask myself why am I selling it when I tell everyone to buy it? I really do not have an answer to that, other than I always think of futures trading as a two way trade, but it’s really not. It has become so one sided that anything you do on the sell side is a mistake, especially when you are getting out of a profitable trade.
Early last week I bought 2286 and 2289. Both positions had great trade locations, and all I had to do was use a stop and hold it, but instead I took a small profit when the futures dipped back down. Call it Murphy’s law, or Riley’s law, the only way to hold a position is to put it on and walk away. Right now, or until further notice, it’s a ‘buy the breaks’ type market, and while I still think there is going to be a sell off in the first quarter, it’s possible the S&P keeps going. Do I think it will? I don’t know, but what I do know is the shorts are getting wiped out, and it doesn’t matter who big a name you have in the business because the S&P is not taking any prisoners right now.
It’s 6:30 am and the ES traded up to 2318.00, pulled back down to 2313.50 and just rallied back above 2317.00. Last week we said 2310.00 and 2320 were levels of interest, and now the fESH is just 3 handles away. The relentless rally seems not to care about how overbought it is, or that bullish sentiment is reaching extreme levels not seen in many years, or that hedge fund exposure is above 40%. Nothing seems to matter, or at least it doesn’t right now. I know the markets look great and I know the Dow, S&P and Nasdaq are all on new contract highs with no end in sight, but I still believe that when this big bull party ends that the S&P will fall alot faster. We are not here to fight city hall, but I still think there will be a point(s) and time(s) when it does fall, it’s just a matter of when. Until then, just go with the flow…
While You Were Sleeping
Overnight equities saw a risk on move in Asia and Europe, as all Asian markets closed higher, and this morning all European markets are higher, with the exception of Moscow. The S&P 500 futures opened the overnight session at 2314.25 and pushed to a session high of 2318.00 early after the Tokyo open, and then traded weaker into the Asian close, making the overnight low of 2313.50 below the open as Asian markets were closing. Since then the ES has traded higher back up to 2316.75, up 4.00 handles on the session, with volume at 81k as of 6:06 am cst.
In Asia, 11 out of 11 markets closed higher (Shanghai +0.63%), and in Europe 10 out of 11 markets are trading higher this morning (DAX +0.71%). This week’s economic calendar includes 25 eco reports, 8 Fed speakers and 16 U.S. Treasury events. Today’s economic calendar includes a 4-Week Bill Announcement, 3-Month Bill Auction and a 6-Month Bill Auction.
Our View
It’s been a very one sided trade with no let up. In most cases when we see this it doesn’t end well. That said, there is no fighting it. This week we have a fairly busy economic schedule. Is 2320 going to be the high? I doubt it! Once the ES goes quiet it just moves higher. Our view is two fold; you can sell the early to midday rally and buy weakness, or just buy weakness when the ES sells off a little while paying close attention to the MrTopStep 10 handle rule.
Download the February expiration stats here
Market Vitals for Monday 02-13-2017
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- In Asia 11 out of 11 markets closed higher: Shanghai Comp +0.63%, Hang Seng +0.58%, Nikkei +0.41%
- In Europe 10 out of 11 markets are trading higher: CAC +0.96%, DAX +0.71%, FTSE +0.06% at 6:00am ET
- Fair Value: S&P -3.12, NASDAQ -1.10, Dow -46.13
- Total Volume: 1.77m ESH and 3.9k SPH traded
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