There is a story out there that the Trump election win has been good for the retail futures traders. That might true, but the real winner has been the algorithmic and high frequency trading programs. Yesterday’s high volume and all the ‘erratic movement’ was all part of the new world trading order, where the robots not only control the playing field, they direct it.
When you take yesterday’s total emini S&P 500 futures volume of 1.5 million and subtract 175,000 contracts from Globex, the total comes to 1.3 million. That doesn’t sound so bad, but when (I am being nice) you take out 70% for program trading, the total number of contracts traded by humans drops down to 400k. It gets worse… When you take the total day volume of 400k and you divide that by the 6.5 hour trading session, the volume drops down to around 50k contracts traded per hour. Sure there are some ES contracts that are tied to the CME’s S&P 500 options, but after a full day of thrashing, that’s not that much volume.
Citigroup, JPMorgan and Wells Fargo Report Before The Bell
Look, I could do a big play by play of yesterday’s trade, but in a nutshell, President Trump spooked the S&P when he told the Wall Street Journal that the “dollar is getting too strong,” and followed it up by saying he would prefer the Federal Reserve ‘keep interest rates low’. That put pressure on the banking sector, which has been getting beat up over the last four to six weeks. The KBW Nasdaq Bank index which included 24 of the biggest U.S. lenders, fell 7.7% in the last month compared with the S&P 500 -1.2% decline over the same period. Yesterday the bank index fell -1.1% vs. the S&P’s -0.4% decline. Oil fell after the EIA showed U.S. output continues to grow, gold rallied to a new 5 month high, and the dollar fell.
CBOE Volatility Index and the Anxiety Index
On Tuesday the VIX closed above 16 for the first time since the election. One of the things I talk about is what I call ‘event driven trading’. This means that the markets tend to move sharply in one direction, and then they move sharply the other way. One example if this was back on Aug 24, 2015 during the weak numbers out of China when the Dow futures (YMU17:CBT) opened over 1,000 points lower. The most recent examples are the Brexit vote and the U.S. presidential elections.
While those examples may not be the same as today, the VIX did close up 5% on Wednesday, and is up more than 20% over the past four trading sessions. The S&P 500 futures (ESM17:CME) are down just over -0.50% over the same four days, making it the the highest jump in volatility since the election. Is this the quiet before the storm, or just another pop and drop for the VIX?
One thing that recent history has told us is that the VIX doesn’t rally for very long. However, when it typically rises as it has over the last week, usually it will at least push up to the 20.00 level which is another 20% higher than yesterday’s close. By all indications this morning, it will likely be at 17.00 very soon today.
While You Were Sleeping
Overnight, equity markets in Asia had a modestly lower tone, followed by Europe, which is seeing all markets in the red currently. In the U.S., the S&P 500 futures opened the globex session at 2338.75 and pushed down to 2334.50 early in the session before rallying up to the overnight high at 2344.00 going into the Euro open. Since then there has been a sold off down to a new low at 2332.25 just a few minutes ago. As of 6:09 am cst the total volume is 186k, with the last print being 2334.00, down 6.75 handles on the day.
In Asia, 8 out of 11 markets closed lower (Nikkei -0.68%), and in Europe 11 out of 11 markets are trading lower this morning (DAX -0.30%). Today’s economic calendar includes the Weekly Bill Settlement, Jobless Claims, PPI-FD, Bloomberg Consumer Comfort Index, Consumer Sentiment, EIA Natural Gas Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 5-Yr TIPS Announcement, the Baker-Hughes Rig Count, Bond Market Close: 2:00 PM ET, Fed Balance Sheet and Money Supply.
S&P Futures Down 6 Out Of The Last 8 Sessions
Our View: Today officially kicks off the 2017 Q1 earnings season with Citigroup, JPMorgan and Wells Fargo all reporting before the bell. According to FactSet U.S., companies are expected to report their strongest quarterly earnings since 2011. While I think today could be an up day, I still think there is downside risk floating around. With the markets closed for the Catholic holiday, ‘Good Friday’, there is a good chance that people cut out early for the three day weekend, and that should set up some type of thin to win type trade. Like the title to today’s Opening Print says, there are a lot of moving parts.
PitBull: CLK osc 27/12 turns up on a close above 5449, ESM osc -7/-6 turns up on a close above 23555, VIX osc 30/6 turns down on a close below 1486.
Market Vitals for Thursday 04-13-2017
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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 lower: Shanghai Comp +0.07% , Hang Seng -0.21% , Nikkei -0.68%
- In Europe 11 out of 11 markets are trading lower: CAC -0.56%, DAX -0.30%, FTSE -0.63% at 6:00am ET
- Fair Value: S&P -3.58, NASDAQ -0.60, Dow -66.63
- Total Volume: 1.53mil ESM and 4.4k SPM traded
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