It was a quiet start to the week. The S&P 500 futures (ESZ16:CME) opened 5.25 handles lower on the 8:30 CT futures open. The CBOT’s 10 year note was up 12/32nds, crude oil futures (CLF7:NYM) were trading above $46.20, the dollar index (DXZ6:ICE) was down -0.12%, and gold (GCG7:CMX) was trading at the 1190.50 level, up +0.80%. Despite all the net changes, the markets started out the day quiet, and ended that way also. Clearly, not everyone was back from the Thanksgiving holiday.
Russell 2000 Down for the First Time in 19 Sessions
While the debate continues to rage about the S&P going to far too fast, it really doesn’t seem to matter. After opening at 2206.25, down 5.25 handles, the ESZ16 looked very quiet early on. Some 9:30am cst buy programs pushed the ES up to a high print of 2209.50, but immediately reversed and sold down to 2201.25 just after 10:00 am. The S&P did grind higher midday, making a lower high at 2208.75, before getting weak late in the day.
The MiM came online showing MOC orders building to the sell side, and news was breaking that OPEC members have been unable to reach a deal on production cuts. Meanwhile, the ESZ started to roll over, trading down to 2199.00, on an MOC of $1.4 billion to sell. Going into the equity close the S&P’s made a new 2198.25 low, 10.25 handles from the morning high, and eight handles from the cash open, before settling at 2200.75. The net change on the close was -10.75 handles, the biggest losing day since November 2.
Italy Concerns
We could do a big blow by blow of the day’s trade, but in a nutshell, the S&P waited all day for the $1.4 billion for sale on the close. The ESZ16 went out weak making new lows in the final minutes of the day. Sure the S&P has gone too far too fast, and its overbought, but the big thing right now is that the markets may not like what’s going on in Italy.
After Great Britain voted for their exit of the EU, the concern was that other nations would follow. The Italian referendum vote could put the EU closer to a demise, and even has the potential for sparking a banking collapse. This, combined with OPEC, and then a busy economic calendar which includes GDP, Fed Minutes, and NFP, should lead to higher volume this week. In turn, the higher volume, and more participation after a quiet period, would likely lead to lower prices.
Overnight global equity markets were quite mixed with sideways to lower price action in both Asia and Europe. The S&P 500 futures traded in less than a three handle range until the European open when the index bounced trading up to 2206.00, up 5.25 handles from yesterday’s settle. The ES is currently two ticks off that high with about 87k contracts traded as of 6:19 am cst.
While You Were Asleep
In Asia, 6 out of 11 markets closed lower (Nikkei -0.27%), and in Europe 7 out of 11 markets are trading lower this morning (FTSE -0.58%). Today’s economic calendar includes Stanley Fischer Speaking, GDP, Corporate Profits, Redbook, S&P Corelogic Case-Shiller HPI, William Dudley Speaks, Consumer Confidence, State Street Investor Confidence Index, and a 4-Week Bill Auction.
Dow Moves Up 1,000 Points In November
Our View: Can the Dow end the month up 1,000 points? That is yet to be seen. Today is ‘Turn Around Tuesday,’ and that means bounce day. The big question is, can the S&P hold up all day? I do not think it will, and I also expect the S&P to close out the week down over 1%. Is that a big deal? No it’s not, and it will probably end up more of a positive, but I think it’s time for some contrarian thinking. When the crowd goes from short to long into new all time contract highs, there has to be shake outs, it’s how things work. Our view is to sell the early rallies and buy weakness, keeping in mind how far the ES has gone over the last 3 weeks of higher closes.
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 +0.18%, Hang Seng -0.41%, Nikkei -0.27%
- In Europe 7 out of 11 markets are trading lower: CAC +0.52%, DAX +0.03%, FTSE -0.58% at 6:00am ET
- Fair Value: S&P -1.58, NASDAQ -.72, Dow -14.99
- Total Volume: 1.37m ESZ and 6.7k SPZ traded
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