While making money trading the S&P 500 futures may not be that easy, yesterdays view for the day was exactly how things played out; less people trading, lower volumes, and narrow trading ranges. With Christmas only 5 days away, and only 3 trading days left in the week, things should continue exactly like they were yesterday, less and less people trading going into the end of the week, and the end of the year.
Yes, there is always the Santa Clause rally that starts after Christmas, and then into T+3 and the year end rebalance, but with stocks up so much and bonds down so hard, it’s my guess that we see some type of sell stocks / buy bonds re-allocation on the last trading day of the year. The beginning of 2017 may start out slow also with the Donald Trump set to be the 45th President of the United States and the inauguration on January 20, 2017.
Will Mr Trump continue his daily attacks, or will he ‘quiet down’ as he gets closer to the big day? We think the latter, but we also do not think his own people can get him to shut up, so why should we expect anything less? With the public and most of the banks and big investment firms cutting back, Donald Trump is the wild card for year end, and beginning of the year volatility.
We knew yesterday was going to be quiet, after a narrow overnight range on low volume, and that’s exactly what we got. There is not much to say about this market as it gears down for the low volume grind of Christmas, so we will keep this short. On the regular session open the S&P 500 futures (ESH16:CME) printed 2265.25, up 5.25 handles, and found an early low at 2264.00. From there the ES rallied up to 2269.50 before trading sideways to lower for the rest of the session, making a series of lower highs and lower lows.
Going into the final hour, the MrTopStep market imbalance meter was showing the MOC orders building to the sell side up to $850 million, but the S&P’s rallied up to 2267.50 before settling the day at 2266.50, up 6.50 handles on the day on a MOC of 30 million to sell, with total volume coming in at 800k.
Overnight worldwide stock markets were mostly sideways to lower. The S&P 500 futures opened globex at 2267.25, made a high of 2267.75, and since then have traded down to 2263.50. The ES last printed 2264.00, down 2.5 handles, on volume of 49k as of 6:27am cst.
Today has the heaviest economic calendar of the week so far, with just three items. It’s difficult to think that anything on the calendar will do much to interrupt this chop, so after the first hour it’s likely to get very quiet as we continue to look for sub one million volume days, with ranges less than 10 handles. Bulls need 2270 and bears need 2250. In between it’s all chop.
Asia and Europe
In Asia, 7 out of 11 markets closed lower (Shanghai +1.11%), and in Europe 9 out of 11 markets are trading lower this morning (FTSE -0.17%). Today’s economic calendar includes the Bank Reserve Settlement, MBA Mortgage Applications, Existing Home Sales and the EIA Petroleum Status Report.
Our View
The charts have gotten easier to read the last few days. Why? I’ll tell you why, because less volume means the algos can’t eat, and when the algos can eat, they can’t exploit the ES. I think we should get a million man march and go to Washington and demand the government step in and get all the cash back that we have lost due to algorithmic and HFT trading. Sounds like a joke? I don’t think it is at all. Who said its ok to have bots running wild in the futures markets? There is no free money floating around in these markets, it’s all man vs steel.
I think its funny how traders that have been around for 30 for 50 years do not say much about it. I guess they just look at it like it was and like it is. Lets face it, the bots do more volume than we do. I say it all the time, no one cares if you lose money, not the exchange, not the broker. That’s why being more selective is going to be the only way to do this. I learned that over the last few months. When I tried to step it up and make more money, I got out of my comfort zone. What normally would be an unacceptable loss was ok. That is NOT OK, and it never will be.
As the 2016 year end nears, the best advice is not to trade, or to cut back significantly. All too often traders find themselves making ‘holiday boredom trades’ that, I hate to say, don’t work out. This is not good for holiday cheer. Our view; today should start a mass exodus away from the screens as more families prepare for the Christmas holiday. If you are going to trade, we lean to buying the early weakness and selling the rallies. We still think there could be some selling before the end of the week.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets closed lower: Shanghai Comp +1.11%, Hang Seng +0.37%, Nikkei -0.26%
- In Europe 9 out of 11 markets are trading lower: CAC -0.55%, DAX -0.06%, FTSE -0.17% at 6:00am ET
- Fair Value: S&P -3.86, NASDAQ +2.98, Dow -54.23
- Total Volume: 814k ESH and 7.5k SPH traded
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