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Monday again proved itself to be the lowest volume day of the week for the S&P 500 futures (ESZ13.CME). As the week wears on, we think the markets will, too. If you are one of those who say volume doesn’t matter, then you may want to skip over this part.
To me, volume matters, and when you break it down, yesterday’s is an amazingly low number. Friday’s total volume in the S&P 500 futures (e-mini) was 1.5 million contracts with 225,000 contracts coming from Globex, pre-8:30 open. When you take out the 225,000, total volume drops to 1.25 million contracts traded in the day session.
Yesterday’s volume was 400,000 contracts lower than Friday. When you take the 225,000 contracts from Globex out of the 1.1mil total, that brings the total down to 875,000, and when you take out 50% for program trading, that leaves only 435,000 contracts traded in the day session. Volume equals trade, and yesterday there was no volume and there was no trade. Total volume in the CME Group’s [CME] S&P 500 options stood at 14,000 contracts at the end of the day.
[pullquote]The Asian markets closed mostly higher and Europe is mixed to modestly higher.
Economic calendar: September jobs report, Redbook, construction spending, Richmond Fed Manufacturing index, natural gas numbers
Earnings: Amgen, DuPont, United Tech, and Travelers. [/pullquote] Monday’s trade may be an indication of things to come. After being up 7 of the last 8 trading sessions or up 102 handles from the 1640 lows, with a deluge of old and new data scheduled to be released, we think we could see some sideways to lower price action.
There are two scenarios for the S&P 500 futures and stocks in general:
- The S&P has gone so far so fast it needs to sell off to go back up again, or
- We see a few days of sideways to downward price action and start moving up again. Either way we feel strongly the S&P is not done going up.
Our view
Yesterday the S&P traded into another all-time contract high and the Nasdaq Composite closed at a new 13-year high. The bulls have yet to take a rest. The way we see it is the S&P needs to rebuild its thrust. While we expect higher prices, we cannot rule out a pullback this week before the bull market resumes. Today’s jobs number should not have much effect but all eyes will be on the number this morning. We lean to selling rallies and buying weakness.
As always, keep an eye on the 10-handle rule and please use stops when trading futures and options.
- In Asia, 6 of 11 markets closed higher: Shanghai Comp. -0.83%, Hang Seng -0.52%, Nikkei +0.13%.
- In Europe, 8 of 12 markets are trading modestly higher: DAX +0.17%, FTSE +0.38% .
- Morning headline: “S&P Futures Lower Ahead of September Jobs Report”
- Total volume: 1.1mil ESZ and 7.9k SPZ traded
- Economic calendar: Jobs number, Redbook, construction spending, Richmond Fed Manufacturing Index, EIA Natural Gas Report.
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