(ES Macro Market Profile RTH Friday)
The July options expiration went as planned. The futures rallied to new all time highs exactly as planned. While the talking heads on CNBC we’re talking about everything from Brexit to earnings, MrTopStep was looking at two things late in the day. The first part was the ratio to July calls expiring vs the puts and the late day buy on the MrTopStep imbalance meter (MIM), which started out showing big size to buy, but faded out going into the futures close.
BUY US / SELL EUROPE
The early day buying pressure pushed the ESU16 up to 2164.75 and then dumped on the open making an early low of 2156.75, but that gave way to another round of selling that took the ESU to a mid session low of 2149.00. Late in the day, they rallied up to 2157.25, and ended up settling at 2152.70 on the 3:15 futures close.
Its Sunday night, and like most ‘bad’ news, the S&P has made good of it as Turkey widened its crackdown on suspected supporters of a failed military coup. This is another great example of traders selling the news too early and getting run over. Lets face it, like it or not, the S&P is ‘bullet proof’ right now. Will the S&P continue higher this week? As of Fridays close the S&P has rallied over 8.5% since making its Money June 27th 1981.50 low, and like the DOW, is now trading at new all time contract highs.
I have always said that I am a street guy and I do not always base my view of the stock market simply on technicals or news. The only way to trade and beat the markets is to be a contrarian and have a little street smarts. Clearly there has been a shift away from European stocks back to the US markets, and according to Lipper data investors charged back into domestic stocks last week showing their first inflows into US stocks since April.
According to Lipper, funds took in $7.8 billion over the seven days through July 13th. The buying by the funds showed up mainly in the exchange traded funds (ETF’s) which mainly concentrated on the purchases of domestic stocks. Thomson Reuters Lipper research analyst Pat Keon said U.S. domiciled funds – including both mutual funds and ETFs – took in $33.5 billion of new money for the fund-flows week. “This was the largest positive weekly net inflow of the year coming in at over twice that of the $16.6 billion net inflow for the fund-flows week ended January 27, 2016,” Keon said. “Of note, equity funds broke a 10-week streak of net outflows by taking in $7.8 billion in net new money and municipal bond funds recorded their 41st straight week of inflows as they grew their coffers by $1.2 billion.”
At the end of the quarter and throughout the Brexit collapse there was a continuation of the sell bonds and buy stock reallocation. In addition to that there has been a lot of buy S&P sell oil trading going on. This all leads to one thing, money moving back into the U.S. stock markets. At the end of the day the overall patterns that I talk about almost everyday remain in tact; zero borrowing cost and a flood of new cash moving back into the US markets. Will the S&P keep going up this week? My gut tells me we are heading to a down week.
(ES Money Maker Globex Session)
Overnight global equities markets traded mixed and flat as the S&P 500 futures bounced back on the globex open trading at 2154.50. Heading into this mornings cash open, the S&P 500 is still caught in a game of cat and mouse between sellers on every high, and buyers that try to buy it up on every small pullback. The calendar is very light this week, and the lower volume from last week will likely continue into this week. It’s starting to feel like summer, but this probably won’t last long.
Since last week the globex session has seen all the gains while the RTH has posted losses. This can’t continue much longer before sellers are able to push the index back to a test near the 2100 area.
In Asia, 9 out of 11 markets closed higher (Nikkei +0.68%), and In Europe 8 out of 12 markets are trading lower this morning (DAX -0.04%). This week’s economic calendar is very light and features 18 economic reports, and 14 U.S. Treasury events. Today’s economic calendar includes the Housing Market Index, a 4-Week Bill Announcement, a 3-Month Bill Auction, a 6-Month Bill Auction, and Treasury International Capital.
Our View: The S&P is the top dog. If you’re one to trade the events then you better have your bids in after you sell because you may end up like Brexit, chasing the futures higher to cover your shorts. I see this from so many good traders; they put the position on, the S&P falls, and then they freeze up when the futures blast higher. That’s why I say it pays to be a contrarian, just like the algos. Our view? The PitBull says the S&P rallies early in the week and early in the day. Our view, sell the early rallies and buy weakness with the idea that we could be getting close to a 30 to 40 handle pull back.
As always, please use protective buy and sell stops when trading futures and options.
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- In Asia 9 out of 11 markets closed higher: Shanghai Comp -0.35%, Hang Seng +0.66%, Nikkei +0.68%
- In Europe 8 out of 12 markets are trading lower: CAC -0.25%, DAX -0.04%, FTSE +0.33% at 6:30am ET
- Fair Value: S&P -6.22, NASDAQ -6.78, Dow -81.25
- Total Volume: 1.49m ESU and 6.5k SPU traded
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