The wall of worry has not gone anywhere, but the S&P 500 futures are not showing much stress. After the lowest levels in the VIX since 2014 on Monday, Tuesday’s trade was muted. Trading volume has evaporated. At 10:30am cst yesterday, total volume was a mere 465,000 contracts, with 105,000 contracts traded on Globex.
Yesterday’s main event was Apple earnings. The ESM rallied up 2387.25 after Apple (AAPL) reported rising profits and revenue. In the first quarter of 2017, Apple’s profits rose 4.9%, to $11.03 billion, the company’s first quarterly increase in earnings in more than a year. After the 3:00 cash close the ES dropped going into the 3:15 futures close. Apple shares fell -1.8% in after hours trading after posting +0.6% gains on Tuesday.
In terms of the day’s overall trade, the ESM17 was stuck in a 4 to 5 handle range for most of the day, on very low volume. With regard to the overall tone, the ES seems to be back and filling. The S&P is ‘wasting time’. The little dips keep getting traders to sell and add buy stops above the market.
In other news, Greece struck a deal with its international creditors over fresh austerity measures. There is a 95% chance that the Fed will not raise rates today, but according to the fed fund futures, a June rate hike looks quite possible. June crude oil dropped 2.5% to $47.66 a barrel, and posted its second lowest close of the year. The 10 year note fell to 2.296%, compared to Monday’s close at 2.327%. The dollar held steady, and gold was down.
While You Were Sleeping
Overnight, global stock markets had an overall lower tone, as Asia and Europe indexes traded mostly lower. In the U.S., the S&P 500 futures opened the globex session at 2384, and printed the overnight high at 2385.25 just before the Tokyo open. From there, the futures traded sideways to lower, down to a session low of 2381, completing a 4.25 handle range. As of 7:00 am cst, the S&P’s last printed 2382.50, down 3.25 handles on the day, with 62k contracts traded.
In Asia, 6 out of 10 open markets closed lower (Nikkei +0.70%), and in Europe 9 out of 12 markets are trading lower this morning (FTSE -0.33%). Today’s economic calendar includes MBA Mortgage Applications, ADP Employment Report, Gallup U.S. Job Creation Index, a 3-Yr Note Announcement, a 10-Yr Note Announcement, a 30-Yr Bond Announcement, Treasury Refunding Announcement, PMI Services Index, ISM Non-Mfg Index, EIA Petroleum Status Report, and the FOMC Meeting Announcement.
Our View:
According to FactSet, after more than 60% of S&P 500 companies having reported earnings, firms are on track to post their best results since the third quarter of 2011. It’s hard for me to think the S&P wants to go down right now. It seems like when you take out the geo-political risks, everything is moving along fine. Mondays total S&P volume was 897k, yesterday’s total volume was 949k, and I think volume could stay low. I also think the (ESM17:CME) is going to take out the ES’s 2401 all time high this week. All it needs is a little push, and the algos will do the heavy lifting.
This morning we have a fairly busy economic and earnings schedule, but once past that, we think the S&P is going up. Our view remains the same; you can sell the rallies and buy weakness, or go with the trend and just wait for the pull backs and buy it.
PitBull: CLM osc -15/-8 turns down on a close below 4844, ESM osc 18/7 turns up on a close above 240374, VIX osc -20/-4 turns down on a close below 878.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 10 open markets closed lower: Shanghai Comp -0.25%, Hang Seng +0.33%, Nikkei +0.70%
- In Europe 9 out of 12 markets are trading lower: CAC -0.39%, DAX -0.21%, FTSE -0.33%
- Fair Value: S&P -3.77, NASDAQ -2.25, Dow -68.37
- Total Volume: 958 k ESM and 4.1 k SPM traded
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