S&P 500 Futures: No 1% Declines In 108 Trading Days #S&P500 #ESM

Charts, Commentary, News, Our View, Technical Analysis, The Opening Print

What happened during Friday’s S&P 500 futures trade? It was business as usual; a small sell off in the first part of the day and, then the ‘Late Friday Rip’ showed up a little early. While your charts may tell you where the 50 or 100 day moving average is, MrTopstep believes that there are basic patterns that exist, like the dip the S&P sometimes sees going into the European close, or how the guys with the better seat show up to save the S&P late in the day.

Heading into the close on Friday, volume (including Globex) was only 820,000 contracts. It was a rough week of dips and rips, and it doesn’t seem like there is a big appetite for trading. After the (ESM17:CME) made its 2373.75 low, it turned around and traded up to 2382.25, up 3 handles on the day. The MiM (MrTopStep imbalance Meter) was showing $196 million to sell before flipping to over $2.5 billion to buy. It’s all tied to the March expiration. The problem for the bulls was that the MiM started to show high levels of MOC buying long before 2:00 CT, and after the futures rallied, the MiM started to come back down. The futures tumbled back down to a new low at 2373.00, just 3 ticks away from a MrTopStep 10 handle rule.

By the end of the session, the S&P’s saw some strong liquidation going into the quad witch and rebalancing, and then an MOC of $2.5 billion to buy, which was unable to counter the late selling. The low came in at 2372.75 going into the 3:00 pm close, and the MOC orders helped push the market back up to 2376.75 before the day settled at 2374.75, down 4.50 handles.

Where From Here

Like I said above, traders are always looking for an ‘event’ to sell. Instead of going with one of the most basic principles of trading, ‘the trend is your friend’, they lose track and end up selling it, forgetting the overall direction on the markets. When the futures do move down, what usually ends up happening? A big squeeze occurs and you surely do not want to be on the receiving end of that.

So where from here? Well, the expiration was down, but not by much. The stats show the week after the March Quad Witch as down, and so are the last 3 trading days of March. Including today, there are a total of 10 trading days left in the first quarter of 2017. To tell the truth I really do not know what the ES is going to do, but if I had to guess, I would say down a little then back up. The real problem for the bears is all the money pouring into the US stock markets. It’s not just domestic money pouring in, it’s coming in from all over the world. As I have always said; if you want to know where the S&P is going… follow the money.

No 1% Declines In 108 Days; How Long Can This Go On?

Overnight, stock markets in Asia had a mostly lower tone, and in Europe all major markets are currently trading lower. The S&P 500 futures opened the globex session at 2372.75, down 3.5 handles, and printed a high of 2374.75. From there, the futures traded lower for much of the night, down to a low of 2368.75 early in the Tokyo session, before rallying back up to 2373.25 soon after the Euro open. As of 6:12 am cst the futures have last printed 2372.50, down 2.75 handles, on volume of 69k.

In Asia, 7 out of 11 markets closed lower (Shanghai +0.41%), and in Europe 10 out of 11 markets are trading lower this morning (DAX -0.48%). This week’s economic calendar includes just 13 reports and 10 Federal Reserve bank presidents speakers. Today’s economic calendar includes Chicago Federal Reserve Bank President Charles Evans speaking on Fox Business News and later at NABE luncheon, Chicago Fed National Activity Index, a 4-Week Bill Announcement, a 3-Month Bill Auction and a 6-Month Bill Auction.

Our View

This week is supposed to be down according to post quad witch stats, and I think there is a good chance we see some type of weakness. With a small economic calendar and a bunch of Fed speak this week, it could end up a quiet week, but with the VIX trading in the 10 handle, it could be ‘buyers beware’. While I am bullish I also am in the camp that the public is overly complacent. Low VIX and a high level of complacency is never good. Our view is to (if the ES opens down) to buy the early weakness and sell the rallies.

As always, please use protective buy and sell stops when trading futures and options.

  • In Asia 7 out of 11 markets closed lower: Shanghai Comp +0.41%, Hang Seng +0.79%, Nikkei -0.35%
  • In Europe 10 out of 11 markets are trading lower: CAC -0.49%, DAX -0.48%, FTSE -0.15% at 6:00am ET
  • Fair Value: S&P -3.64, NASDAQ 2.47, Dow -53.20
  • Total Volume: 1.27 mil ESM and 3.1 k SPM traded
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Danny Riley (1444 Posts)

Danny Riley has worked in the futures and options industry for 38 years, including the CBOT’s bond room, where he worked for several of the Market Wizards. He went on to build the largest volume desk in the S&P 500 Index Futures, serving some of the largest banks and hedge funds, the UBS program trading business, and some of the world's top individual traders. As a leader and co-creator of the MrTopStep IM-Pro Trading Room, he shares trading ideas and breaking market news live from the floor with our other professional traders and new traders eager to experience the power of collective intelligence. Join us today and get the edge only social trading can give you.


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