The S&P futures 500 (ESM17:CME) closed slightly lower after its first 1% decline since October. The futures initially traded down off the open, popped up to 2347.25, made a higher low at 2343.00 and then blasted up to 2356.00 around 10:20 CT. The early ‘dip’ happened fast and was followed up by a few buy programs that hit a line of buy stops and ran from the 2340.70 level all the way up to the high. After the high, the ES back and filled around the VWAP at 2348.00, and eventually sold back off down to the 2340 area.
Is the Trump trade over? I am not sure about that, but what I am sure of is the public has become very weary about the administration’s ability to deliver on its pro-growth policy agenda. I also know that the markets hate uncertainty, and that seems to be where the markets are this morning. Even before Tuesday’s -1.2% drop the ES was stalling out.
The Trump trade has been to be long stocks that benefit from improved U.S. growth, short bonds and long the dollar, but that trade got upended during Tuesday’s sell off, but the real winning trade has been to buy Europe and Asia. The MSCI Emerging Markets Index is up 8.6% in 2017—driven by double-digit gains in Turkey, China, Hong Kong and India—trumping the S&P 500’s 4.7%. While the big investment firms have done well in the US stock markets there has also been an overhang of doubt that Trump will actually be able to deliver on his campaign promises.
Director at Fidelity International Catherine Yeung said “There’s a lack of confidence in the reforms and the overall policy agenda, and that’s been spoken about underpinning the whole market sentiment and animal spirits so far.” Traders are starting to believe that not only has the Trump rally gone too far, but some think this could spell disaster for the markets. America Merrill Lynch’s monthly survey of 200 funds managing $592 billion, and around four-fifths believe U.S. stocks are the most overvalued of all. Around a third believe the U.S. dollar is overvalued, the highest level since June 2006.
While You Were Sleeping
Overnight, equity markets in Asia were all modestly higher and Europe is trading modestly lower.
In Asia, 7 out of 11 markets closed higher (Nikkei +0.93%), and in Europe 9 out of 11 markets are trading lower this morning (FTSE -0.13%). Today’s economic calendar includes Durable Goods Orders, Charles Evans speaks, John Williams speaks, James Bullard speaks, PMI Composite Flash, William Dudley speaks, Baker Hughes Rig Count, John Williams speaks.
Our View
Today Risk has gone up considerably. The last minute negotiations to lobby a majority has failed, and Trump is now saying that if the health care vote fails, Obamacare stays. Today republicans are expected to bring the bill to the House floor to replace the Affordable Care Act and they don’t know if it will pass or not. Our view? We think it may get a little crazy and that there is a good possibility that the ES takes a hit. I lean to selling rallies, but I want to get a look at the price action.
PitBull: CLK osc -16/-22 turns up on a close above 4780, ESM osc -29/2 turns up on a close above 233644, VIX osc 14/0 turns down on a close below 1255.
Market Vitals for Friday 03-24-2017
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As always, please use protective buy and sell stops when trading futures and options.
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- In Asia 7 out of 11 markets closed higher : Shanghai Comp +0.64%, Hang Seng +0.13%, Nikkei +0.93%
- In Europe 9 out of 11 markets are trading lower : CAC -0.41%, DAX -0.13%, FTSE -0.12% at 6:00am ET
- Fair Value: S&P -3.42 , NASDAQ 2.72 , Dow -54.16
- Total Volume: 1.62mil ESM and 3.8k SPM traded
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