S&P 500 Futures ‘Pre-Jobs Dip and Rip’
The S&P 500 futures have been down 7 out of the last 10 sessions. Yesterday’s quick downside sell off was a combination of a batch of disappointing data, weakness in the oil and index markets, and some position adjustments in front of today’s August jobs report. After a 17.50 handle sell off from its early high to the low of the day, the ESU16:CME short covered slightly, then went back down near the lows. A move back up started when the MIM (MrTopStep Imbalance Meter) started showing $250 million to buy two hours before the close.
The Value Of The MIM
We at MrTopStep understand the value of a good indicator, and the MiM has been nailing it (learn about the MiM here). It’s what is “pattern fitting.’ Meaning the pattern that best fits right now is to sell the early rallies, like we have been suggesting, and then ‘buy the weakness’. When the low is timed correctly, and the late day mutual fund buying kicks in, there is no better way than to look at the MiM. One of the other things I have learned is not to buy too early. Many traders talk about 11:30 ET and the European close, but I think that has been played out.
After the S&P drops like it did yesterday, and the selling or sell programs dry up, it’s the first trading day of the new month and there is cash to buy. The net result is a late day 14.75 handle rally. Lastly, despite the selling, the S&P futures (ESU16:CME) closed at 2173.50 last Thursday and settled at 2167.00 on yesterday’s 3:15 ct time futures close. A lot of noise for only a little movement. In terms of the day’s overall volume, there was big volume on both the decline and late rally. In terms of the ES’s overall tone, we understand the S&P has been going down, but there just doesn’t seem to be a lot of progress. That makes us wonder if the funds and the public are over hedged.
Oil Hits Three Week Low
In the end, gold closed up 0.44% at $1317.20 and crude oil settled at $43.53, down -2.62%. The S&P futures (ESU16:CME) closed down 2.25 points, or -0.11%; Dow futures (YMU16:CBT) closed unchanged; Nasdaq futures (NQU16:CME) closed up .07%, or up 3.75 points, at 4777.50. The Dollar / Yen closed off -0.02% and the Euro closed up + 0.01% at 1.12. Both the productivity numbers pointed toward stagnation, and the ISM manufacturing index came in under the 50 level for the first time since February.
Traders are looking for 180,000 non-farm payroll for the August jobs report. Commodities like gold and crude oil have retreated. Oil was in bull territory and up 20% on the year three weeks ago and is now down 16% from its early June high. Gold reached as high as 1377.50 back on July 6 and traded down to 1305.50 this week. Clearly there is liquidation going on, but only in certain sectors. Today’s number will be interesting and will most definitely have an impact of the fed’s future rate hike prospects.
Jobs Jobs Jobs
Overnight equity markets around the world continued their push higher. The ESU traded in a tight five handle range making an early low in the Euro session at 2164.75. A push up at 5:40 am cst made a high of 2169.50. Currently the ES is trading near the middle of the range at 2166.50, down three ticks on the day, on volume of 133K at 6:50 am cst.
Going into today’s session the NFP reaction will be most relevant. Bulls need a weekly close above last week’s 2186.75 high, while bears need a close below this week’s 2154.75 low. Will either side get their target? Well, the pain trade will likely be if the ESU settles the day where it has seemed to open and close all week, between 2168 and 2175.
In Asia, 7 out of 11 markets closed higher (Shanghai +0.13%), and in Europe 10 out of 11 markets are trading higher morning (FTSE +1.10%). Today’s economic calendar includes the Employment Situation, International Trade, Factory Orders, Baker-Hughes Count, and Jeffrey Lacker Speaks.
Our View
We have to go with some type of counter trend Friday. If it’s a bad number, and the ES opens down, we lean to buying them. If it gaps sharply higher, we want to sell that rally. Thats for the first part of the day. After that we will to wait to see if the guys with the better seats show up. I had a few good day’s trading this week, and the PitBull says to cut my size or don’t trade, I’m thinking the latter.
Market Update with Dave Wienke from ‘Point 786’
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 +0.13%, Hang Seng +0.45%, Nikkei +0.04%
- In Europe 10 out of 11 markets are trading higher: CAC +1.06%, DAX +0.29%, FTSE +1.10% at 6:00am ET
- Fair Value: S&P -1.27, NASDAQ +.32, Dow -9.66
- Total Volume: 1.95mil ESU and 4.1k SPU traded
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