When will this change? Some people think we are on the cusp of a downtrend, but I don’t think so. There has only been 1 session in the last 30 that the S&P has had over a 0.50% move, and according to Ryan Detrick, senior market strategist at LPL Financial, the S&P 500 has now gone 242 trading days without suffering a peak-to-trough slide of 3%, the longest such streak on record.
On the rare occasions that the S&P does sell off, the bears come flying back in howling for a larger decline. Some even warn of an impending crash, but in most cases when the ES does sell off, it either goes right back up the day it drops, or it rallies the next day. How many down days do we actually get? Furthermore, how many 2 and 3 day declines have we seen over the last 3 months? Not many.
On yesterday’s open the S&P 500 futures first print was 2567.50. The Globex range was 2569.00 – 2562.25, with 192,000 contracts traded before the 8:30 CT futures open. After the open, the ES rallied up to 2569.25, and then sold off down to 2564.25 at 8:45. From there, the ES rallied back up 1 tick above the vwap at 2566.25, and then made a new low by one handle at 2563.25. After the low the ES rallied back above the vwap, made a higher low at 2564.75, and then rallied up to 2569.00 at 11:54 CT, before trading back down to 2566.75, 1 tick above the vwap.
Unlike Monday, when GE was down almost 6.5%, Caterpillar and 3M helped push the Dow up to its best day since September 11th, making its 54th new all time high in 2017. According to FactSet, 24% of the companies in the S&P 500 have reported results for the third quarter so far, with this week being one the busiest weeks of the 3rd quarter earnings season. By Friday, more than half of the major index companies will have reported results. Together, CAT and 3M contributed more than 140 points to the Dow industrials’ gain.
At the end of the day, the markets giveth, and the market taketh away. The ES was down Monday, and up Tuesday. When it was all said and done the S&P 500 futures (ESZ17:CME) settled at 2567.25, up +3.75 handles, or +0.14%; the Dow Jones futures (YMZ17:CBT) settled at 23403, up +175 points, or +0.74%; the Nasdaq 100 futures (NQZ17:CME) settled at 6079.50, up +14.75 points, or +0.24%; and the Russell 2000 (RTYZ17:CME) settled at 1501.40, up +3.70 points or +0.24% on the day.
While You Were Sleeping
Overnight, equity markets in Asia traded mostly higher, with the JSX Composite leading the way at +1.23%. Meanwhile, in Europe, stocks are trading mostly lower this morning, with the FTSE holding things down at -0.33%.
In the U.S., the S&P 500 futures opened last night’s globex session at 2564.75, and was held to less than a 6 handle range. As of 7:15am CT, the last print in the ES is 2564.00, down -3.50 handles, with 143k contracts traded.
In Asia, 9 out of 11 markets closed higher (Shanghai +0.30%), and in Europe 7 out of 12 markets are trading lower this morning (FTSE -0.33%).
Today’s economic calendar includes Wednesday: Data — MBA Mortgage Applications (7:00 a.m. ET), FHFA House Price Index (9:00 a.m. ET), New Home Sales (10:00 a.m. ET), EIA Petroleum Status Report (10:30 a.m. ET); Earnings — Anthem (6:00 a.m. ET), Thermo Fisher Scientific (6:00 a.m. ET), Ingersoll-Rand (6:30 a.m. ET), Northrop Grumman (6:30 a.m. ET), Coca-Cola (6:55 a.m. ET), International Paper (6:59 a.m. ET), GlaxoSmithKline (7:00 a.m. ET) Sirius XM (7:00 a.m. ET), Nasdaq (7:00 a.m. ET), Walgreens Boots Alliance (7:00 a.m. ET), Lear (7:00 a.m. ET), Baxter International (7:15 a.m. ET), Boeing (7:30 a.m. ET), Hess (7:30 a.m. ET), General Dynamics (7:30 a.m. ET), Dr Pepper Snapple (8:00 a.m. ET), Norfolk Southern (8:00 a.m. ET), Amgen (4:01 p.m. ET), GrubHub (4:05 p.m. ET).
Not Just About The Earnings This Week
Our View: The earnings deluge continues today. So far it’s been down a day / up a day this week, and I’m not sure that type of price action won’t continue. While I am still bullish, I don’t think it’s just about the earnings this week. On Thursday, the European Central Bank is expected to announce changes to its gigantic bond buying program. Most economist think they will pair back the bond buying program, but also extend the program well into 2018. There is no doubt about trying to cut back from all the QE, but it’s not going to happen right now.
Our view? It seems like the markets are tired. That doesn’t mean the ES will go down much, but we can’t rule out some type of selling. I am like most people. I want to see a selloff / pickup in volatility, but I also remain in the camp that there is not going to be any large drops, or a crash. Sell the rallies and buy weakness with tight stops.
Market Vitals for Wednesday 10-25-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 9 out of 11 markets closed higher: Shanghai Comp +0.30%, Hang Seng +0.53%, Nikkei -0.45%
- In Europe 7 out of 12 markets are trading lower: CAC +0.27%, DAX -0.05%, FTSE -0.33%
- Fair Value: S&P -3.34, NASDAQ +0.22, Dow -51.74
- Total Volume: 1.04mil ESZ & 406 SPZ traded in the pit
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