Labor Department hiring data furthered the idea that the broader economy is strengthening after a batch of weaker data earlier this year. While Friday’s rally may not have changed investors minds about the recovery, it did change the mindset of the indices. The S&P 500 futures (ESM17:CME) rose 12.2 points, or 0.57%, to 2397.70, but traded up to 2399.25 after the close. The Nasdaq Composite 100 futures gained 22.5 points, or 0.41%, to 5648.25, its third record close of the week. The Dow Jones futures (YMM17:CBT) rose 83 points, or 0.48%, to 20954.00. All three indexes posted a third consecutive week of gains.
During Thursday nights Globex session, Crude oil futures (CLM17:NYM) quickly sold off more than 5%.
On Wednesday, Bloomberg did a story about JP Morgan’s Marko Kolanovic saying to buy bank puts going into Fridays jobs number, and buy puts for the French election. There seemed to be a high level of doubt about Friday’s report, but the S&P acted firm.
Trader Dave sent me a message Twenty minutes before the jobs number was released. He said that ‘the whisper number is for 200k jobs,’ and as the 7:30 ct number got closer to the release, the S&P 500 futures started ‘going bid’.
When the clock struck 7:30, the U.S. nonfarm payroll number came out at 211,000 jobs. The (ESM17:CME) initially rallied up to the 2390 level, pulled back a little, then traded up to 2390.75, and pulled back a little again before making an early high at 2391.50. After the high, the ES ‘stutter stepped’ down to 2386.60, 2385.50, and then down to 2385.00, before bouncing back up above the vwap at the 2388.00 level, 3.5 handles off the day’s high, and only 9.5 handles off the e-mini S&P 500 all time contract high of 2401.00.
By 10:00am CT on Friday, the (ESM17:CME) was held to a 6.5 handle trading range, and just about 500,000 ES contracts have traded. During the credit crisis on a jobs Friday pre-8:30 Globex volume was 400,000 to 500,000. Friday’s Globex volume was 155,000. That’s a far cry from 500,000!
Late in the day the ES started to take out the buy stops. For the last few days I have been talking about a big line of buy stops that starts above 2391.00 and goes all the way up to 2406-2412. In the end, it was a good old fashion French election ‘squeeze’ job.
I understand the word ‘slow’, I understand the words ‘low volume’, but I don’t understand where all the traders have gone? I hate to refer to the term ‘in the old days,’ but in this case, I must. One of the biggest market moving economic numbers used to be the Friday jobs report. It was a day that we knew was going to be busy, and we would be yelling and fighting as soon as the futures opened at 8:30. It didn’t matter if the number was good or bad, the S&P would stay busy right to 11:00.
The other bigs days were the quarterly quad witching options expirations. If you didn’t have your head on straight, or if a guy at the desk was falling behind, the whole desk would go up for grabs. The desk would be fighting with the pit clerks, and each other. These two days made up a very good share of the years most volatile days. Both days would create oversize order flow, and the locals in the pit knew it.
While You Were Sleeping
Overnight it was reported before the Asian open that Macron has won in France. The Asian markets rallied modestly, with the Nikkei up 2.3%, but the Shanghai Composite was lower. In Europe this morning, equity markets are mostly lower, with the French CAC down .81%. In the U.S. the S&P 500 futures gapped open at 2402.50, up 4.75 handles from Friday’s RTH close, and printed a high of 2403.75 soon before falling back down for much of the session. A low was found at 2392.25 about an hour into the European open. Since then the S&P’s have rallied back up to 2397.25. As of 7:15 am cst, volume is just about 180k, with the S&P last printing 2394.25, down 3.5 handles on the day.
In Asia, 8 out of 11 markets closed higher (Nikkei +2.31%), and in Europe 10 out of 12 markets are trading lower this morning (CAC -0.81%). This week’s economic calendar includes 22 economic reports, 8 Fed speakers, and 12 U.S. Treasury events. Today’s economic calendar includes James Bullard Speaking, Loretta Mester Speaks, Labor Market Conditions Index, a 4-Week Bill Announcement, a 3-Month Bill Auction, a 6-Month Bill Auction, and TD Ameritrade IMX.
Muted Market Reaction To French Election
Emmanuel Macron has fought off populist opponent Marine LePen, won the election, and became France’s next president, but who cares? The markets reaction to the Macron win was totally muted. The reason? Because he was so far ahead, and it never changed. Unlike Brexit, there was no wild card, and the markets knew it. Initially the currency markets were moving. The EURO traded up to a new 6 month high at $1.1010, but the overall effect of Macron’s win for the ES was a small pop, and then a small drop.
Hedging Kills
Our view: Do I think the ES can go higher? Yes, I do, but I also think it’s important to be careful around all time contract highs. The public starts cheering the markets higher after they already rallied, and that puts risk of a pull back into the futures. My gut says the ES could see 2430, or even 2450, but that doesn’t mean the ES won’t see 2380 or 2370.
We all know how this works. The markets wait on the ‘event’. The big investment firms and funds hedge positions, and the buyers use the shorts to help fuel the markets higher. Like always; you can sell the early to mid day rallies and buy weakness, or just wait for the pull back and buy it.
Market Vitals for Monday 05-08-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed higher: Shanghai Comp -0.85%, Hang Seng +0.41%, Nikkei +2.31%
- In Europe 10 out of 12 markets are trading lower: CAC -0.81%, DAX -0.18%, FTSE +0.16%
- Fair Value: S&P -3.77, NASDAQ -4.02, Dow -61.38
- Total Volume: 1.12 m ESM and 3.2 k SPM traded
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