There was little to no action in the index futures markets during Friday’s trade, nor has there been for the last two months. After the big drop in the Nasdaq, the markets have leveled, off but the continued rotations are happening everyday. Buy Dow, sell S&P and Nasdaq; sell Nasdaq, buy S&P and Dow.
We could do a blow by blow of last Friday’s trade, but there was no trade. For most of the day the ES was stuck in a 2471.00 to 2474.50 trading range, riding just above and just below the vwap. Later in the day, the MIM was showing $350 million for sale, and ‘flipped’ in the last second. The final MOC came out to buy $570 million, and he ES rallied up to 2474.50 on the close.
There is a lot of talk about the low volatility going on, and how it’s not going to end well. But, in trading, it’s not a question of if, it’s a question of when. Below is a list of the last 8 weeks of Friday (ESU17:CME) settlements.
| Date | Open | High | Low | Last | Change | Settle | Volume | Previous Day Open Interest |
| 2017-08-04 | 2470.75 | 2477.75 | 2467.75 | 2471.5 | 0.25 | 2472 | 1056850 | 3044605 |
| 2017-07-28 | 2472 | 2472 | 2461.5 | 2470.75 | 1.75 | 2470.25 | 1138605 | 2970960 |
| 2017-07-21 | 2472.5 | 2475.25 | 2462.75 | 2470 | 1.75 | 2469.5 | 1080206 | 2936167 |
| 2017-07-14 | 2446.5 | 2461.25 | 2442 | 2457.5 | 10.5 | 2456 | 1076239 | 2854397 |
| 2017-07-07 | 2409.25 | 2425 | 2407.5 | 2423.25 | 14 | 2422.5 | 1249140 | 2824775 |
| 2017-06-30 | 2420.75 | 2429.75 | 2415 | 2421.5 | 1 | 2421 | 1614299 | 2839900 |
| 2017-06-23 | 2431.25 | 2438.75 | 2428.25 | 2432 | 3.25 | 2435 | 1187845 | 2820925 |
| 2017-06-16 | 2431.25 | 2436.75 | 2420.25 | 2434.5 | 1 | 2431 | 1322355 | 2814642 |
“VIX Shock”
Last week Interactive Brokers sent out a letter to its clients.
I still think things could start the same, but the PitBull says you always have to be careful from the last week of July to the third week of August, but when brokerage firms start sending out letters like this, it generally means they are scanning for oversized risk. Hiking margin rate is one of the first warnings of possible market disruptions.
As we all know, the VIX jumped sharply in late August of 2015, when the Dow opened down 1,000 points, and the VIX was unable to give reliable quotes. For now, it’s business as usual, but it also may be time to lower the short VIX positions, and try to come up with a strategy. In case something does change quickly, you have a good hedge against a possible quick sharp decline in the futures index markets. It may end up that you are throwing away money, but it also may save your ass if something does happen quickly.
Interactive is what I consider one of the ‘smarter firms. You do not hear about them getting in trouble because they are run so well.
Read the full letter here
While You Were Sleeping
Overnight, equity markets in Asia traded mostly higher, led by the ASX 200, which closed up +0.89%. Meanwhile, in Europe, markets are currently trading mixed, with a slight bias to the downside.
In the U.S., the S&P 500 futures opened last night’s globex session at 2472.25, and immediately began trading higher. The overnight high at 2477.50 was made just after 8:00pm CT, then the futures drifted sideways for the 6 hours. At 2:30am CT, a steady grind lower began, taking the ES down to a new low of 2472.00, extending the overnight range to 5 handles. As of 7:00am CT, the last print in the ESU is 2473.25, up +1.50 handles, with 92k contracts traded.
In Asia, 8 out of 11 markets closed higher (Shanghai +0.54%), and in Europe 7 out of 12 markets are trading lower this morning (FTSE +0.16%). This week’s economic calendar consists of 21 reports, 10 U.S. Treasury auctions and announcements, and 5 Fed speakers. Today’s economic calendar includes Gallup US Consumer Spending Measure, Labor Market Conditions Index, a 4-Week Bill Announcement, a 3-Month Bill Auction, a 6-Month Bill Auction, James Bullard Speaks, TD Ameritrade IMX, Neel Kashkari Speaks, and Consumer Credit.
Our View
Our view is simple; we still think 2485-2500 is on tap, but as my friend Hayes said, you can keep buying the weakness in the ES, but buy some puts. I’m not saying today or tomorrow, but there’s no reason not to start think about some type of protection in some downside lotto tickets. The PitBulls time frame is upon us.
PitBull: CLU osc 9/17 turns up on a close above 51.21; ESU osc 2/17 turns up on a close above 2477.68; VIX osc 7/-4 turns up on a close above 10.80.
Market Vitals for Monday 08-07-2017
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- In Asia 8 out of 11 markets closed higher: Shanghai Comp +0.54%, Hang Seng +0.46%, Nikkei +0.52%
- In Europe 7 out of 12 markets are trading lower: CAC -0.02%, DAX -0.45%, FTSE +0.17%
- Fair Value: S&P -2.62, NASDAQ -1.53, Dow -57.60
- Total Volume: 1.0mil ESU, and 430 SPU traded in the pit
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