S&P 500 Futures and Mutual Fund Mondays ‘Squeeze Job’

S&P 500 Futures and Mutual Fund Mondays ‘Squeeze Job’

The end of the story has not been written, this small ‘selling’ chapter ended in true fashion with a big ‘Mutual Fund Monday Squeeze Job.’ As we have always said, it takes days and weeks to knock the S&P futures down, and only one to bring it back.

We could do a big blow by blow of the day’s economic reports and news, but that’s not what you came here for. MrTopStep is made by traders, for traders. We don’t believe in long, drawn out, overviews of the day’s trade. In short order the S&P futures stalled last week. 6 out of the last 9 sessions and closed lower. Last Thursday started off weak, gained a little strength, then sold off after the Janet Yellen headlines hit the tape. The S&P futures made a high of 2186.75 early Friday morning and made a late day low of 2157.50. The S&P looked weak but then rallied all the way up to 2170.25 On Friday’s close.

During Sunday night’s Globex session the futures sold off 2.5 handles, down to 2164.25, then started to short cover early yesterday morning. The ES made its low on Monday mornings 8:30 CT open then went into a continuous buy program that pushed the futures all the way up to 2181.50 around 11:30 CT.

T+3

If you want to hear what the talking heads on CNBC have to say about this rally, you will not get the actual version. The real version is two fold. The first part is that the mutual funds tend to mark up stocks on the last three days and first three days of the month / quarter (T+3). The second part is far more basic; ‘the trend if your friend.’

One of the things I try to share is not just my ‘street smart feel,’ I also do my best to not forget some of tradings most basic principles. Historical statistics, volume, overbought, oversold and trying not to fight the trend. I try not to overlayer things too much. I find things that I feel comfortable with and don’t believe in adding more and more indicators. Keep it ‘simple stupid.’ I’ll bet no one heard anything like this on CNBC or Fox.

Low Volume, Small Pullbacks

After making the early high the ES pulled back and then made an afternoon high. The biggest pullback was three handles going into the close. In spite of an MOC of nearly $600 million to sell, the index closed off the last hour low. Clearly the lower volumes favored the upside. Friday’s total volume in the CME Group’s S&P 500 emini futures was 2.5 million contracts. At yesterday’s close the total volume was only 1.2 million, with 145,000 of the volume coming from Globex, pre-8:30 open.

Overnight global equity markets traded mostly higher. The S&P 500 futures traded sideways making a 2180.75 high early in the Asian session, then a low of 2176.75 early in the European session. As of 6:15 am cst the ESU6 is trading at 2178.75, down two ticks on the session, on volume of 105K.

Yesterday the bulls took care of business pushing the index higher and closing well above Friday’s cash open. It would make sense for some turn around Tuesday trade. Given the lack of ESU strength, while Europe has rallied, points to some possible sideways to lower action today.

Bulls vs Bears

Bulls need to hold 2175 and 2170 as the last line of defense and begin to push higher ahead of NFP. Bears need to push lower today back below 2175 and then begin to target Friday’s low over the next couple of days. Given the light calendar and pre-holiday week, we are unsure if either side will be able to take care of business. Given the recent Fed remarks, the NFP print may be the only thing this week offering a noticeable trade.

In Asia, 7 out of 11 markets closed lower (Hang Seng +0.85%), and in Europe 12 out of 12 markets are trading higher this morning (DAX +0.92%). Today’s economic calendar includes Redbook, S&P Case-Shiller HPI, Consumer Confidence, State Street Investor Confidence Index, and a 4-Week Bill Auction.

Our View: The day before the last trading day of August has the S&P down 15 of the last of the last 19 years. Will they go down? Sure they can, but until there is some type of structural change, this old dog is going to continue to think higher prices. That said, the next few days could be tricky, and we will see some two way flow / buying and selling. Our view is the same, sell the early rallies and buy weakness. Now that the bulls are back talking 2200.00 you have to be careful.

The S&P 500 Futures and Mutual Fund Monday

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• In Asia 7 out of 11 markets closed higher: Shanghai Comp +0.15%, Hang Seng +0.85%, Nikkei -0.07%
• In Europe 12 out of 12 markets are trading higher: CAC +0.75%, DAX +0.92%, FTSE +0.08% at 6:00am ET
• Fair Value: S&P -1.47, NASDAQ .62, Dow -7.86
• Total Volume: 1.25mil ESU and 7.2SPU traded

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