Long before the headlines hit the tape that “GERMANY SAID TO CONSIDER OFFERING GREECE STAGGERED DEAL ON AID”, the S&P 500 futures were already moving higher. After closing lower 2 weeks in a row, the S&P 500 futures (ESM15:CME) double bottomed at the 2071.25 on Tuesday, firmed up on the close, and moved higher during Tuesday night’s Globex session, pushing the futures all the way up to 2086.75. On the 8:30 CT futures open the ESM15 traded 2080.75, made an early low at 2087.20 and started moving higher again, running several index arbitrage buy programs as the algos chased the buy stops higher. Then in came the Greek headlines about a possible deal and the S&P rallied right to where I said they would in yesterday’s Opening Print; 2106-2108.
U.S. stocks rose sharply, lifting the Dow futures (YMM15:CBT) to its biggest one-day gain in more than a month led by technology and financial shares. The Dow futures rose 251 points, or 1.3%, to 18018.00. The S&P futures (ESM15:CME) added 26.80 points, or 1.2%, to 2109.90, and the Nasdaq futures added 57.25 points, or 1.25%, to 5076.69. The DAX snapped a four-day losing streak to gain 2.4%. Gold futures rose 0.7% to $1186.10 an ounce, crude-oil prices gained 2.1% to $61.43 a barrel, and the yield on the benchmark 10-year U.S. Treasury note rose to 2.467% from 2.417%. It saw a smashing day for both the bulls and the bears.
Headline Hungry S&P
The overall trade is exactly the same pattern we have been seeing for the last four to five years. The sellers find a reason to start selling, in come the negative headlines, and down go the S&P futures. That part of the equation we understand, it`s what happens after bad news. I still say zero borrowing cost, and the central banks, keep the stock market from falling too far, but I also insist that the buyers use the shorts to give them the bargain prices they want before they move the markets back up. I think it’s critical to not only look at your chart, but to remember the psychology of how the markets rally after selloffs and pullbacks.
As I have said many times it’s the same old picture being shown over and over again, and what I don’t get is why traders don’t get it. But that’s what makes markets go up and down, I guess. The other thing that makes the markets go up and down are the news headline algos. For sure they played their part during the decline, but the 24 hour, 37 handle rally was exactly how the game is played. The first part is MrTopStep’s trading rule that it takes days and weeks to knock the S&P down, and only one to bring it back. Rule no.2 is even more important than rule no.1: NO STOPS GO UNTOUCHED IN THE S&P 500 FUTURES.
The upper chart shows the 2071.25 double bottom and push back to 2108.00, and the chart below shows last nights 11 handle drop. Like I said; NO STOPS GO UNTOUCHED.
In Asia 8 out of 11 markets closed higher, and in Europe 9 out of 12 markets are trading higher this morning. We have a busy economic calendar today starting out with Jobless Claims, Retail Sales, Import and Export Prices, Bloomberg Consumer Comfort Index, Business Inventories, EIA Natural Gas Report, 3-Month Bill Announcement, 6-Month Bill Announcement, 30-Yr TIPS Announcement, 30-Yr Bond Auction, Fed Balance Sheet, and Money Supply.
World Bank Joins IMF in Urging Fed to Delay Rate Rise Until 2016
Our View: I think the S&P knew there was a deal long before the news hit the tape. The ESM took off to the upside at night, during the morning session and after the Greek headlines hit, the algos did the rest of the heavy lifting. I went back and looked at the last 9 Fridays, and 7 of them were within 10 to 12 handles of S&P futures 2100.00. This morning we have a very busy economic schedule. When I spoke to the PitBull we both agree we could see some type of pullback today which falls right in line with our trading rule that the S&P tends to go sideways to lower after a big up day, but it looks like we got part of that last night. Keep an eye out for the PitBulls Thursday/Friday low and don’t forget about next week’s positive stats for the June Quad witch. You can take it from there…
See all of the expiration stats here.
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- In Asia 8 of 11 markets closed higher : Shanghai Comp.+0.30%, Hang Seng +0.83%, Nikkei +1.68%
- In Europe 9 out of 12 markets are trading higher : DAX+0.68%, FTSE +0.33%, MICEX -0.54% , GD.AT +6.84% at 5:45 am CT
- Fair Value: S&P -9.50 , Nasdaq -10.39 , DOW -94.98
- Total Volume: 1.66mil ESM and 9k SPM traded
- Economic calendar: Jobless Claims, Retail Sales, Import and Export Prices, Bloomberg Consumer Comfort Index, Business Inventories, EIA Natural Gas Report, 3-Month Bill Announcement, 6-Month Bill Announcement, 30-Yr TIPS Announcement, 30-Yr Bond Auction, Fed Balance Sheet, Money Supply..
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