What’s been going on in the S&P 500 futures? The price action has changed. Over a week ago every time the ES dropped below the vwap you had to buy it. As of the last five trading sessions, when it pops above the VWAP, you sell it.
The S&P 500 futures overall price action has flipped, and it’s not just the failed rally stuff, it’s the big sellers we have been seeing just before the 8:30 CT futures open. The other flip-flop is the late day price action, or going into the 2:30 to 2:45 cash close, when the (ESH17:CME) usually rallies, but has been getting hit by big late day sell programs.
Yesterday was a perfect example of it. The ES sells off down to a new low at 2363.75, buyers show up, and the futures rally up to the vwap at 2368.25. After that they got smacked by a late day sell program that pushed the ES down to another new low of the day at 2360.75.
Another thing that also stuck out was the lack of volume. Around 2:00 there was just over 1 million ES futures traded, that’s low, but 200,000 of that came from Globex. With so many important economic events, it looks like the trade has gone from risk on to risk off.
Other than that, it was a pretty slow day in the index futures markets, but that was not the case in the energy futures markets. Crude oil was already weak, but after the inventory numbers showed a build, and supplies rose 8.2 million barrels to set a record, (CLJ17:NYM) the high frequency and algorithmic trading programs attacked the downside sell stops all the way down to its 50.05, down 5%. The bonds got crushed too, falling all the way down to 147.09. Was it a busy day? No. Were the markets moving? Yes. Do we expect more volatility after the ECB? Yes.
Today is also the rollover or switch day. The June contract trades front month. Like I have said in the past; the roll used to be big, but with the open interest in the big S&P contract (SPH17:CME) down to 88,000 from its high of over 650,000, and most spreads done electronically on the ES, the net effect is almost nothing. No one cares about the S&P roll other than switching to JUNE on your platform and getting used to looking at the JUNE price. This is the same thing with the ‘quad witching,’ it used to be one of the busiest first hours of the year, now most of the trade is done before Friday morning’s open, and what is left is not enough to keep the S&P busy for every long. All gone the way of the computer.
While You Were Sleeping
Overnight global equity markets traded weaker. Almost all Asian & European markets have been seen in the red. In the U.S., the S&P 500 futures traded sideways to higher pushing to a session high of 2366.75 (ESH) early in the Euro session. Later in the morning, the futures fell back down to 2359.50, matching yesterday’s globex low, and has tried to lift from there, last printing 2362.00, down 2.00 handles, as of 6:02 am cst.
In Asia, 9 out of 11 markets closed lower (Shanghai -0.74%), and in Europe 9 out of 11 markets are trading lower this morning (FTSE -0.68%). Today’s economic calendar includes Challenger Job-Cut Report, Jobless Claims, Gallup Good Jobs Rate, Import and Export Prices, Bloomberg Consumer Comfort Index, Quarterly Services Survey, EIA Natural Gas Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 30-Yr Bond Auction, Fed Balance Sheet, and Money Supply.
PitBulls Thursday / Friday Low The Week Before The March Quad Witch
Our View: The S&P 500 futures have fallen 5 days in a row, or 6 of the last 7 sessions. So much for the 1 and 2 day declines. The mold is broken, but does that mean the ES will keep going down? We thought the ES was going to do a u-turn the days leading up the the inauguration and after the 37 handle rip up to 2401, and as I write this the futuree just traded down to 2355.75.
Today is switch day. The June futures contracts go front month. You do not have to switch right away if you have March positions on, but if you don’t have a position, I think it’s best to switch over so you get used to seeing the prices. Other than that we have a big round of economic reports and the ECB’s rate decision. It could get busy.
Our view is that with the ES down 5 days in a row, and the PitBulls Thursday / Friday low upon us, we think there could see some type of bounce. We admit that the ES does not act well, but it’s still holding last week’s 2357 low (or was). I put out support early in the week at 2361.00 to 2358.00, but that seems a little tight now. I think we need to see how the ES acts if it breaks 2357. I am going to keep it like that. There are lots of moving parts, now it’s time to see how they fall.
PITBULL: clj -20/-2 turns up on a close above 5289, esh osc -5/23 turns up on a close above 238416, vix osc -5/2 turns down on a close below 1077.
Market Vitals for Thursday 03-09-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 9 out of 11 markets closed lower: Shanghai Comp -0.74%, Hang Seng -1.18%, Nikkei +0.34%
- In Europe 9 out of 11 markets are trading lower: CAC -0.23% DAX -0.24%, FTSE -0.68% at 6:00am ET
- Fair Value (Jun): S&P -2.90, NASDAQ +5.77, Dow -41.65
- Total Volume: 1.65m ESH 300k ESM and 5.8k SPH 3.3k SPM traded
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