Friday’s jobs report was the strongest we’ve seen in close to a year. June non-farm payrolls added 222,000 jobs, and the June unemployment rate held steady at 4.4%. Stocks reacted in kind to the positive data, with the S&P 500 futures (ESU17:CME) rallying up to 2417.50, and the Nasdaq 100 futures (NQU17:CME) trading up to 5635.50 just after the report was released. After the initial reaction, stocks pulled back a little heading into the 8:30am CT cash open. The ES opened the regular session at 2413.75, up 5.25 handles, and the NQ opened up at 5619.00, up 22.25 points.
Once the smoke cleared from the jobs report, the ES traded in a 6 handle range from 2411.75-2417.75 for most of the morning, while the NQ continued to rally. The strength in the Nasdaq just wouldn’t spill over to the ES, which has been the case for a couple weeks now.
Just before 10:30am CT, the futures caught a bid, and the short squeeze was on. By 12:30pm the ES had rallied up to 2425.00, and the NQ made it all the way to 5676.50. It was a thin-to-win type of rally, and the bots were definitely in charge.
In the end, the S&P 500 futures (ESU17:CME) settled at 2422.50, up +14.00 handles, or +0.57%, the Dow Jones futures (YMU17:CBT) settled at 21370, up +90 points, or +0.42%, and the Nasdaq 100 futures (NQU17:CME) settled at 5655.75, up +59.00 points, or +1.08%.
Water in the Bathtub
Last week was a perfect example of what the PitBull calls ‘Water in the Bathtub’. They run the buy stops early in the week, then come back and run the sell stops later in the week, and when it’s all over, the ES ends up right back where it started.
This isn’t necessarily a market indicator, but it does show that there is some indecision. These types of moves are almost entirely algo driven, and that means a lot traders are sitting on the sidelines waiting for some clues to pick a direction.
With the start of the second quarter earnings season tomorrow, we will probably see traders starting to jump back in. Analysts are expecting the energy, tech, and financial sectors to drive Q2 growth.
While You Were Sleeping
Overnight, equity markets in Asian traded mostly lower, led by the JSX Composite, which closed down -0.76%. Meanwhile, in Europe, all majors are trading higher this morning, fueled by soaring export data out of Germany.
In the U.S., the S&P 500 futures opened the globex session at 2423.00, and climbed higher throughout the first half of the Asian session, eventually topping out at 2429.50. From there, the ESU began drifting lower through the Asian close and into the European open. A low was made 2424.00, then, as news of the economic strength in Germany hit the tape, the ES rebounded to 2426.75. Since then, the ES has again found some weakness, and as of 6:30am CT is trading at 2423.25, up +0.75 handles, with 97k contracts traded.
In Asia, 6 out of 11 markets closed lower (Shanghai -0.19%), and in Europe 12 out of 12 markets are trading higher this morning (FTSE +0.22%). This week’s economic calendar consists of 25 reports, 8 Fed speakers, and 11 U.S. Treasury auctions and announcements. Today’s economic calendar includes Labor Market Conditions Index, a 4-Week Bill Announcement, a 3-Month Bill Auction, a 6-Month Bill Auction, TD Ameritrade IMX, Consumer Credit and John C. Williams Speaks.
Our View
For the S&P 500, it’s still a tale of two sides. Bulls have, to their credit, a hold of the 2400 level and as of 6:30am, the most recent print is 2423.25, just 28.75 handles from a new all time high. Bears have, to their credit, a series of lower highs, but have yet to take out the 2400 level.
Today, the economic calendar is very light, and “Mutual Fund Mondays” have been firm, closing higher on 7 of the last 10 occasions, with two of the losing days being just a couple of handles lower.
Our call is to be a buyer on a small early dip this morning, while looking to position short midday following morning strength. The Nasdaq still looks very vulnerable, and if you are looking for a little extra bang for the buck, then we like shorting the NQ’s as a substitute for the S&P.
PitBull: CLQ OSC 2/-4 turns up on a close above 4628, ESU OSC -9/-2 turns down on a close below 242207; VIX OSC 11/2 turns up on a close above 1177.
Market Vitals for Monday 07-10-2017
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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 -0.19%, Hang Seng +0.63%, Nikkei +0.76%
- In Europe 12 out of 12 markets are trading higher: CAC +0.30%, DAX +0.52%, FTSE +0.22%
- Fair Value: S&P -2.19, NASDAQ +2.79, Dow -50.36
- Total Volume: 1.2mil ESU, and 800 SPU traded
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