This is going to be short and sweet. The S&P traded up to 2183.25 on Globex, made a high at 2181.25 on the RTH open, then traded in a 8 handle (point) range for the duration of the cash hours. The session opened with trapped buyers in the European session and sold early down to 2175. Mid afternoon, the ESU16 sold off when crude oil reversed down and made a daily low at 2173.25, then traded up to 2176.50 on the 3:15 CT futures close.
Two weeks ago the ESU16 volume was tracking 1.6 to 1.9 million contracts a day. Last week the volume dropped down to 1.2 to 1.3 million a day. During yesterday’s trade, volume fell even further with only 970,000 contracts traded, including globex. Clearly the public is taking time off as the summer comes to a close. One well known trader I talk to told me he has not been making money the last two weeks due to the narrow trading ranges. He said he is going to ‘watch more and trade less.’ That seems to be the path a lot of traders are taking. This week has a low level of economic reports which should only add to the slow down.
Bearish Sentiment
How long can this last? Yesterday in the trade room I pointed out a blogger poll produced by Birinyi Associates. The weekly poll was released yesterday and reflected some of the largest bullish sentiment on record, for that poll, even though it has been in the bearish camp for much of the year. As I see it, heading near the end of the summer, when volume and ranges are at their lowest, new highs being made almost exclusively on Globex, and bearish sentiment near the highs, this doesn’t seem like a good sign.
For now it seems that the target is 2200 ESU6. Last year I gave that target, and as it turns out, I was a few months early. In the Closing Print yesterday I noted that the S&P first has to close above 2176 before it can go to 2190, triggering all of the buy stops from 2186 to 2194, placing the index just six handles below 2200. From there the 2208 number is big on my horizon.
Overnight global markets were mixed to higher. The S&P 500 futures have been in a sideways range for the session, trading between 2174.50 and 2177.00, only a 2.5 handle range on low volume. Today’s calendar is again light, and if yesterday was the slowest day of the year, it appears that today may even exceed yesterday’s uneventfulness. Above 2177 the futures could begin to hold a bid up to new highs.
In Asia, 7 out of 11 markets closed higher (Nikkei +0.69%), and in Europe 11 out of 12 markets are trading higher this morning (DAX +0.51%). Today’s economic calendar includes NFIB Small Business Optimism Index, Productivity and Costs, Redbook, Wholesale Trade, a 4-Week Bill Auction, and a 3-Yr Note Auction.
Turn-A-Round Tuesday
Our view: The S&P didn’t go up yesterday, but it didn’t go down much either. My gut tells me the S&P trades above 2190, and then above 2200.00 this week. I think the lower volumes will create a ‘thin to win’ environment. Our view is to buy weakness.
Buy Bonds / Sell S&P
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 +0.71%, Hang Seng -0.13%, Nikkei +0.69%
- In Europe 11 out of 12 markets are trading higher: CAC +0.47%, DAX +0.51%, FTSE _0.35% at 6:30am ET
- Fair Value: S&P -4.40, NASDAQ -3.61, Dow -63.71
- Total Volume: 970K ESU and 1.7k SPU traded
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