Is This Normal?
If there was ever a question to ask, when it comes to the current pricing of the S&P, it would be ‘has the S&P 500 futures gone up to far too fast?’ Have the markets gotten ahead of themselves? In yesterday’s Opening Print I talked about the overload of algorithmic and high frequency trading programs in the futures markets. The first thing I want to say is, this is not about ‘spilled milk’. It’s about the markets being manipulated by program trading, and stretching out of the big moves. Like I have said many times, I have seen just about everything during my 38 years on the trading floor, but not the moves we see today.
Instead of saying ‘in the old days,’ I prefer to say ‘in the past.’ In the past, when a big piece of market moving news hit the tape, the S&P futures would sell off 20 or 30 handles. That would have been considered a big move for one day, but now the S&P drops 130 handles, and rallies 155 handles in 2 1/2 days. I do not care what anyone says, to me, anyone that knows anything about the S&P would not consider this ‘normal.’ There is a lot to be said about the change in the S&P’s overall price action over the last 8 to 10 years. When asked if I consider the Trump election moves normal, all I can say is, its become the ‘new normal.’
Monday of the November Expiration Week Chop
Yesterday was a quiet session that did not feel like a 15 handle range. The ESZ opened the cash session up 5 handles, at 2165.50, and chopped lower throughout the morning. The price action was to make a new low by a few ticks, rally three handles, and then chop lower.
The S&P’s made a midday low of 2152.25, down 13.25 handles from the open, and 22.25 handles from the globex high. From there the futures tried to rally into the close. While it did bid higher, the rally was modest, trading up to 2164.00, but failed to retake the open before selling into the close and settling at 2161.00, just above Friday’s final print. The market-on-close imbalance was $1.1 Billion to the sell side as funds are positioning for the mid month rebalance.
While You Were Asleep
Overnight global equity markets traded mixed; mostly lower in Asia, and mostly higher in Europe. The S&P futures opened globex at 2161.00 and made an early low of 2158.50. When Tokyo came online the ES bid up to 2169.75 before trading back down to 2164.00. The ES is currently up 3.50 handles, with just over 144k contracts traded as of 7:19 am cst.
In Asia, 7 out of 11 markets closed lower (Nikkei -0.03%), and in Europe 7 out of 11 markets are trading higher this morning (DAX -0.33%). Today’s economic reports includes the 3-Yr Note Settlement, the 10-Yr Note Settlement, the 30-Yr Bond Settlement, Eric Rosengren Speaks, Daniel Tarullo Speaks, Retail Sales, Empire State Mfg Survey, Import and Export Prices, Redbook, Business Inventories, a 4-Week Bill Auction, Rob Kaplan Speaks, and Stanley Fischer Speaks.
On Tap
Today’s calendar features an early Retail Sales number, then goes light after the open until several Fed speakers take the podium later on. With yesterday’s quiet range, and the overnight volume back to ‘normal’ low levels, it appears that equities may be settling down into the holiday chop. For bulls, the 2158 and 2148 levels are key to hold. For bears, 2170, 2180 and 2185 are important.
Our View: This morning’s eco calendar includes six separate economic reports and four federal reserve bank presidents speaking. The ES traded up to 2169.75 on Globex, and just traded down to the 2162 area. My gut tells me there are a few more days of this ‘sideways to down price action.’ According to the S&P cash study, both Monday and Tuesday are up 15 / down 18, Wednesday is up 21 / down 11, Thursday is up 18 / down 14 and Friday’s numbers show it being up 21 / down 11 of the last 32 occasions.
It’s my guess that today’s price action will be like yesterdays. We will look for the ES will start to firming up Wednesday into Friday. After the big move down, and the big move up, there may not be much left of the expiration. Our view; sell the early rallies and buy weakness. Sell stops start under 2152 and buy stops start above 2172.70.
Download all of the November expiration stats here
Good luck this week traders.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets are trading lower: Shanghai Comp -0.11%, Hang Seng +0.46%, Nikkei -0.03%
- In Europe 7 out of 11 markets are trading higher: CAC +0.21%, DAX -0.33%, FTSE +0.66% at 6:00am ET
- Fair Value: S&P -3.01, NASDAQ 01.14, Dow -53.14
- Total Volume: 1.8m ESZ and 3.1k SPZ traded
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