S&P 500 Futures: Sell $1.6 Billion On The Last Trading Day Of The Year And Buy $1.8 Billion On The First Trading Day Of The New Year

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

Beginning of the Year Statistics and the January Barometer

That’s how it works. The pension funds that sold on the last few trading days of 2016 ‘jammed’ the cash back into the stock market on the first trading day of 2017. According to the Stock Trader’s Almanac, the first trading day of the new year has been up 5 of the last 8 occasions (now up 6 of the last 9), and today’s statistics show the second trading day of the year as positive, Dow up 15 out of the last 23 occasions.

The first 5 trading days of the year can be an important barometer. The last 42 occasions when the first 5 days were up were followed by full-year gains on 35 occasions, with an 83.3% accuracy ratio, and an average gain of 13.6%. It’s a little early in the year to start thinking about how the S&P will close out 2017, but it is important to look at the statistics.

The January Barometer was created by Yale Hirsch in 1972, and has been successful 84% of the time since 1950 according to Jeff Hirsch of Stock Trader’s Almanac. This essentially means that, as January goes, so goes the remainder of the year. This system has deviated certain years where anomalies occured, such economic and political events, including wars, 9-11, and recessions.

According to Hirsch, “Being the first month of the year it is the time when people readjust their portfolios, rethink their outlook for the coming year and try to make a fresh start. There is also an increase in cash that flows into the market in January, making market direction even more important. Then there is all the information Wall Street has to digest: The State of the Union Address, FOMC meetings, 4th quarter GDP, earnings and the plethora of other economic and market data.”

On yesterday’s cash open, the S&P 500 futures printed 2252.00, up 18.50 handles from Friday’s close, and made an early high of 2259.50. It looked like all the cash was being put back to work from last week’s weakness and that we would see a trend day in the S&P’s. However, the index futures suddenly reversed, trading down to 2239.50, a 20 handle sell off, before trading sideways to higher for much of the rest of the session. Late in the day, the ESH17 bounced up to 2253.00, just above the open, on a market on close imbalance of $1.8 billion to the buy side.

The knife in the rally came when crude oil futures (CLG17:NYM) were hit hard. Early in the day, the rally was due to hopes of more production cuts from OPEC nations, and crude futures traded to a new 18 month high of 55.24. However, when it appeared that Libya was considering production increases, crude abruptly changed course and traded to a 10 day low, down to $52.50, taking the equity futures along with it.

While You Were A Sleep

Overnight equity markets in Asia saw a bid as the Nikkei opened the year up 2.5%. Europe, on the other hand, opened modestly lower today. The S&P 500 futures traded down to an early low of 2251 in globex before rallying up to 2257.00 early in the European session. The ESH has last printed 2256.25, up 3.25 handles. on volume of 85k as of 6:15 am cst.

Asia and Europe

In Asia, 9 out of 11 markets closed higher (Nikkei +2.51%), and in Europe 8 out of 11 markets are trading lower this morning (DAX -0.32%). Today’s economic calendar includes the Bank Reserve Settlement, Motor Vehicle Sales, MBA Mortgage Applications, ADP Employment Report, Gallup U.S. Job Creation Index, Redbook, Gallup US Consumer Spending Measure, and the FOMC Minutes.

Our View: This shortened holiday week is filled with big economic reports. That said, it’s all about the last three trading days of the year, and the first three of the new year. The mutual funds that sold big at the end of 2016 started out the year by buying back some of the stocks they sold with a +1.8 Billion dollar buy imbalance on the close yesterday. Many pension funds have a mandate that x dollars need to be put to work in the stock market. So what you saw yesterday could spill over into today. I am not sure the ESH17 will hold up all day, but it’s my guess we could see higher prices. Our view? Sell the early rallies and buy weakness. It seems like there is always some type of knock down, then in come the buyers.

Market Vitals for Wednesday 01-04-2017

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Nasdog.com Commentary for 01-04-2017

Good Morning Traders, and a few in my contacts

I hear So many lines on my charts?  Let me explain here; Beans 992.25 sh, are why I leave up lines when they continually get violated.  IF YOU NEED A #,

and the mkt is going to turn, or hold as here, which I call respecting these combination of levels specific macro funds move high frequency trading strategies off of.  This is big fund money moving.  Over under levels these guys liquidate or accumulate think.

Corn as has been displayed had 2#s,. 358.1, 357.5 and is digesting that buying, over?  361.5 in this chart but I think the poop is going to hit the fan anyday, any hour.

TRADE FOR 2017 ?  I THINK I FOUND IT, it has something to do (macro accounting) of the Trump plan.  This could be the trade of the year, or longer and it is a spread.

This one if true has a fundamental reason on why you put it on.  Nobody much outside his circle has a clue.  I thought this was a trade anyway soon.

I want a piece of it.  When it become apparent you put it on.  It’s actually conservative and we can do notional value of this spread.

I think it could have a 15% move in the spread, <10% leverage is 450%.  You must keep it on what?  If it is a winner and let it work.

Let me remind you that it was one year ago now that crude went under my huge 1st OLB $35.50-36.00 on 3rd retest?

IT WENT STRAIGHT DOWN TO $28.95 IN A MERE 11 DAYS, also another 20% when all of you told me it was going down to the perfect $20.00 of which you would have bought.  NO?

Not one of my professional trader’s of you bought it down there.  Three of my NASDOG VIP members did.

I am awfully good at finding the next big trade except I too have not been able to trade less and shoot for grand slams like all of US.

Watch wheat.  Watch everything, nasd, spus,

I also sent out bonds on right of chart when we were close to that powder blue 149.01 trendline, faint color doesnt mean faint powerful.

ALL MY LEVELS PLAY at that level.  Yea that’s how good they are.  For a trading desk type level placement.

Notice on the multi charts how many were high and low yesterday or last week.  Beans low was this am.  actually a miss 92.25 is red line.  If you need a #?

This is what they and you should use.  It would take a little bit getting this to your desk but please feel free to let me know.

There is a tiny audience for my product that can improve your order entry and risk.

The returns when they turn I can make a case are stellar.  Risk 3-7 ticks to make 50, or more.  See Nasd hit at highs yest. 4927-ish had 2 #’s. 50 handle break, 1 bar 2nd chart, one day.

There are actually 4 hits off that redish trendline because it is what algos use.  Macro lines.

I can follow these but we have make the trade.  Nobody can trade this many markets but I can provide these levels with good ideas at times.

Of course you have to be right but that is with everything trading.

There has to be a mkt for the best levels out there.  I confess I can’t trade like I once could.

If you a a huge trader but don’t know how to read my chart?  Look for my markings in red.  If it is the high or low, those are the winners.

Bonds and notes are holding Olive buy #’s on charts last few weeks, bonds clean not notes but kind of as direction seems to have changed.

Biggest markets ever coming any week now.

Best Always,

Alan Palmer

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 +0.73%, Hang Seng -0.07%, Nikkei +2.51%
  • In Europe 8 out of 11 markets are trading lower: CAC -0.07%, DAX -0.32%, FTSE -0.04% at 6:00am ET
  • Fair Value: S&P -4.49, NASDAQ -0.31, Dow -65.99
  • Total Volume: 1.8m ESH and 5.8k SPH traded
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Danny Riley (2085 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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