Equity Markets Shrug Off Disappointing NFP Report
Going into Friday’s regular session open the S&P 500 futures had seen overnight weakness as news broke concerning the missile strikes in Syria. As the open neared, the S&P’s had rallied from the 2336.75 low going into the non-farm payroll report, which was a very disappointing 98K. Earlier in the week analysts had projected over 200k following Wednesday’s ADP report.
However, as the S&P has been doing, it shrugged off the weak jobs numbers. It would seem that many anticipate a higher revision, which is historically a tendency for March misses. The market also shrugged off the Syrian missile strikes, weak auto sales numbers, and the PMI release from Wednesday.
In last Thursday’s ‘Our View’, we stated that the NFP just doesn’t seem to be much of a market mover anymore, and following the weak report, the futures responded very little movement going into the cash open. The ESM17:CME printed 2352.75 on the 8:30 am cst bell and quickly made its push to the regular session low of 2347.00, just about fifteen minutes into the session. From there, the futures bounced and began to grind higher for much of the session before printing a high of 2360.75 just after 12:30 pm cst. The ESM grew weak going into the close and settled at 2352.25, down five ticks on the day.
What Will Bend Market Confidence?
Last week one could make a case that bulls won because they kept the market from seriously dropping. History tells us that the long bulls can hold within about 3% of all time highs, that in a two day move of buy stops, the index futures can run back up to the highs. However, bears can take some credit last week for being able to continually sell rallies and keeping a lid on the market. The truth is, it’s likely that if you are a firm bull or bear you probably are not very happy with this market, but those who are trading the range and fading its edges are being paid right now, not to mention the option sellers.
Looming over this market is the potential for a government shutdown. While the idea seemed unlikely a few weeks ago, the possibilities of this occurring are quietly growing stronger. With the controlling party of congress unable to come to an agreement on the health care reform, it’s no shoe in that house Republicans will be united when it comes to the federal budget. In fact, political oddsmakers are now suggesting about a 20% chance of such a happening.
As much as it may seem to be a concerning idea, historically, equity markets have performed reasonably calm during times of government shutdowns. At some point the media may start talking more about this, but the fact is, it will probably take more to shake this market.
While You Were Sleeping
Overnight, equity markets in Asia and Europe were mixed, but with a mostly lower tone. The S&P 500 futures opened the globex session at 2351.75 and rallying up to the session high of 2359.00 early in the Tokyo session. From there the futures traded lower going into the European open, pushing to a low at 2349.75, down 2.50 handles at that point. As of 6:27 am cst, the last print is 2354.00, up 1.75 handles on the day, with volume at 113k.
In Asia, 7 out of 11 markets closed lower (Nikkei +0.71%), and in Europe 7 out of 11 markets are trading lower this morning (DAX -0.20%). This shortened week’s economic calendar includes 21 reports, 12 U.S. Treasury events and 2 Fed speakers. Today’s economic calendar includes the Labor Market Conditions Index, 4-Week Bill Announcement, 3-Month Bill Auction, 6-Month Bill Auction, TD Ameritrade IMX, 3-Yr Note Auction and Janet Yellen Speaks.
6 Straight Days Trading On Both Sides of 2350
Our View: The S&P’s seem to be caught in no man’s land for the time being. Bulls & Bears are having a difficult time making money, but savvy two way traders are raking it in. MrTopStep has a saying to “never fall in love with your positions,” and this applies very much right now.
This week’s economic calendar doesn’t have any real benchmark reports, and the stock markets in the U.S. are closed on Friday. The stats show very positive performance heading into the Good Friday holiday, and combined with the lighter calendar, it looks like thin-to-win may be in store for the week.
Our view is to look for the S&P 500 futures to keep a floor at 2350, and to look for shallow pullbacks to buy early. Or, if you are more aggressive, then you can look to just buy the open and attempt to hold through the midday/early afternoon rallies. Then rinse and repeat.
What will change our view is a failure of 2350, and/or heavier volume in the market than what we expect, with some possible headline risk.
PitBull: CLK osc 25/3 turns up on a close above 5285, ESM osc -4/-4 turns up on a close above 235313, VIX osc 9/2 turns down on a close below 1279.
Market Vitals for Monday 04-10-2017
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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 -0.52% , Hang Seng -0.02% , Nikkei +0.71%
- In Europe 7 out of 11 markets are trading lower: CAC -0.52%, DAX -0.20%, FTSE -0.14% at 6:00am ET
- Fair Value: S&P -3.36, NASDAQ +0.17, Dow -61.41
- Total Volume: 1.47 mil ESM and 1.0k SPM traded
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