Everything looked ready to go… The ESM was only 10 handles away from its all time high. On Wednesday night, the e-mini S&P futures rallied after the GOP announced they were going to vote on the health care bill, and then rallied further before the 8:30 CT futures open. Things couldn’t have looked better. Lots of stops above 2391.00, and a full 6.5 Hours of trade ahead. But that’s not how it worked, at least in the beginning of the day.
Lots Of Moving Parts
While the trend is your friend, the S&P just doesn’t always do what you want it to do, when you want it to. The economy is slowing, the Productivity and Cost release showed that U.S. productivity dropped by an annual rate of -0.6%, the worst performance in a year. The (ESM17:CME) traded 2386.75 on the open and immediately started trading lower. U.S Crude oil futures (CLM17:NYM) were extremely weak, and traded all the way down to 45.39, down over 2.2%. Gold and copper were also weak, as was most of the commodity sector. Gold saw its largest weekly drop since Donald Trump was elected.
In the first part of the day it was all liquidation, but after making the early low, the ES made four separate highs at 2386.75. After that, the futures got hit by a big sell program that knocked the ESM all the way down to new daily lows at 2376.00. After the lows were in I started pointing out the buying, and the ES initially rallied back up to 2384.50, pulled back to the 2381.00 area, and then traded up to 2385.00. The ES ‘double topped’ at 2385.00, sold off a little, then rallied up to 2385.75. From there, it sold off below the vwap and made a lower low 2380.25, before shooting up to 2386.25 when the MrTopStep MiM started showing over $200 million to buy on the close. After another dip the ES rallied up to 2386.50 as the MiM ‘flipped’ to $-7 million to sell.
The S&P 500 futures really have been up and down and all around. The first quarter earnings continue to be robust, but the softer economic data seems to be holding back the public. In addition to some weaker than expected economic reports, the geo-political situations continue to hang a dark cloud over the markets.
In the end, the ES closed flat… Again, metals dropped and the GOP voted, and that’s all i got to say about that!
Crude Reality
Doubts about OPEC’s ability to maintain production controls pushed oil to a five month low on Thursday. Investors have been concerned about OPEC’s ability to ease the global glut of oil as the U.S. ramps up production. Light sweet crude for June delivery fell $2.30, or 4.8%, to $45.52 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 29. Brent, the global oil benchmark, fell $2.41, or 4.7% to $48.38 a barrel.
There are a lot of question about OPEC’s effectiveness. Late last year OPEC agreed to production cuts, and Russia, along with several non-OPEC producers, joined in, cutting 1.8 million barrels a day, which pushed crude oil futures prices back up to the $55.00 level. After Thursday’s beating, oil had a very volatile night of trade in Asia. There was a very sudden -3% fall as global investors continue to worry about high inventory levels, followed by an overnight drop of 5% in New York. I said on Periscope on Wednesday that I thought crude oil prices could fall as low as $41.00 on this leg down. While I still think oil will trade down further, I also think the CLM is short term oversold.
While You Were Sleeping
Overnight, equity markets in Asia were mixed, but with an overall lower. European markets followed that lead, and are trading mostly this morning also. In the U.S. the S&P 500 futures opened globex at 2386.00, and failed to catch an early bid before selling into the Tokyo open. The futures pushed down to 2379.00, the area that has been support for a week now, and then rallied into the Asian close. As of 7:00 am cst the most recent print is 2386.00, up two ticks, with just under 90k contracts traded.
In Asia, 6 out of 11 markets closed lower (Shanghai -0.77%), and in Europe 10 out of 12 markets are trading lower this morning (DAX -0.36%). Today’s economic calendar includes the Employment Situation, Stanley Fischer Speaks, John Williams Speaks, the Baker-Hughes Rig Count, Janet Yellen Speaks, James Bullard, Charles Evans, and Eric Rosengren Speak, Consumer Credit, and John Williams Speaks on Saturday.
Jobs Friday
Our View: Employment Situation: Prior 98k, Consensus 185k, Consensus Range 150k to 225k, does any of it really matter? If you follow JP Morgan’s Kolanovic, ahead of the French election you should own puts, especially in bank stocks. At the end of the day, and I could be 100% wrong, I’m not sure any of it matters. If the ES drops sharply, it will rally. If the ES gaps up, they sell the gap and buy it again. Trading volume was a little higher yesterday, but not by much. Today’s volume should be the highest of the week.
That said, our view is that we still think higher prices. You can sell the early to midday rallies and buy weakness, but just remember, there could be some selling tied to the election.
Market Vitals for Friday 05-05-2017
[gview file=”https://mrtopstep.com/wp-content/uploads/2017/05/Market-Vitals-17.05.05.pdf”]
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets closed lower: Shanghai Comp -0.77%, Hang Seng -0.84%, Nikkei +0.70%
- In Europe 10 out of 12 markets are trading lower: CAC -0.11%, DAX -0.36%, FTSE +0.10%
- Fair Value: S&P -3.94, NASDAQ -3.61, Dow -70.99
- Total Volume: 1.2 m ESM and 3.8 k SPM traded
No responses yet