Yesterday’s price action in the S&P 500 futures looked to follow through bullish early on. The ESH17 opened the regular session at 2281.75, up 6.75 handles, and then rallied above Sunday nights globex open in the first 10 minutes of the session. It was starting to feel like a trend day higher. I thought that we would see a close of the gap from Friday’s close to Monday’s open, however, this would not be. The S&P 500 futures turned to sell programs quickly after the open, slicing and dicing right through the overnight gains, pushing through Tuesday afternoon’s gains back down to 2268.00. The futures went from up 10 handles on the day to down 7 handles before finding a low at 10:45 am cst.
The S&P’s traded sideways to higher going into the 1:00 pm FOMC announcement. Once the announcement came out, the ESH ran back down to 2269, before rallying up to 2277.75. Again, the index looked poised to gain ground, but then turned to sellers as the index chopped it’s way to a settlement of 2274.75, closing down a tick on the session. It was another ugly day with buyers taking advantage of good support levels while sellers knocked down rallies.
Despite the huge calendar this week, and the gap open lower Sunday night, the benchmark equity futures have seen a relatively orderly trade this week. It has also been fairly quiet, with the futures now trading in a weekly range of 23.50 handles. While the action is relatively significant, given how quiet the S&P’s have been, the overall range is still slow, and the calendar for the rest of the week may not be enough to push the futures up to 2300 or down to 2250. The money was coming out of the S&P’s at the end of January, but some was put right back to work yesterday with final MOC of $800 million to buy, still keeping this market in a “water in the bathtub” type of trade.
While You Were Sleeping
Overnight, equity markets in Asia were mostly lower, as the Shanghai was still closed due to holiday. European markets opened up with more of a modest bid. The S&P futures opened globex at 2275.00 and printed an early high of 2275.25. From there, the index futures traded lower, making a low of 2264.50 going into midnight, before rallying into the Euro open and trading back up to 2269.75. The ESH and has last traded 2268.75, down 5.75 handles with volume of 133k as of 7:20 am cst.
In Asia, 7 out of 10 open markets closed lower (Nikkei -1.22%), and in Europe 8 out of 11 markets are trading higher this morning (FTSE +0.24%). Today’s economic calendar includes the Weekly Bill Settlement, a 52-Week Bill Settlement, Chain Store Sales, Challenger Job-Cut Report, Jobless Claims, Productivity and Costs, Gallup Good Jobs Rate, Bloomberg Consumer Comfort Index, EIA Natural Gas Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, Fed Balance Sheet and Money Supply.
Our View
The overall price action of the S&P futures remains suspect. Does that mean it will go down? After a decent close the ES traded down to 2264.50 on Globex and recently traded up to 2271.00 this morning. We have another ‘blockbuster’ economic and earnings calendar this morning. All that aside, our view is to sell the 10 handle ‘pops’, using tight buy stops. The ES may rally initially, but I don’t think it will hold.
Market Vitals for Thursday 02-02-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 10 open markets closed lower: Shanghai Comp closed, Hang Seng -0.57%, Nikkei -1.22%
- In Europe 8 out of 11 markets are trading higher: CAC +0.17%, DAX -0.06%, FTSE +0.24% at 6:00am ET
- Fair Value: S&P -4.04, NASDAQ -3.41, Dow -67.89
- Total Volume: 1.6m ESH and 3.9k SPH traded
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