Yesterday, the S&P 500 futures took out the support at the 2388 level, and then dropped down to 2379.00 before rallying back to 2393.50. After the push back up, the futures traded between 2390.00 and 2393.00, before settling at 2391.20 on the 3:15 futures close. The days overall trade and volume were a little busier, but volume tapered after the futures started going back up. In terms of the S&P’s overall tone, the ES acted firm.
Recently, volume in the CME Group’s e-mini S&P 500 contract has been averaging around 1.1 million contracts a day. Yesterday’s total volume was 1.3 million, slightly higher than the recent average. Over the last two Fridays, the ES has settled at 2380.75 and 2399.00.
After the close I spoke to a trader at a $12 billion dollar hedge fund that does a lot of ES trading, and he said the fund is trading less than half the volume they were this time last year. The trader went on to say that “our book is net long stocks and futures, but every time we try and hedge the position we lose money, so we have been cutting back.” I do not think the cut back is just this fund. I think there is a very large cross section of investment firms and hedge funds that have decided to do the same things; not trade as much / cut back.
It’s hard to imagine that the S&P that used to average 2.5 or 3 million contracts a day, and had an all time volume high of 6.69 million contracts in one day, has diminished all the way down to 1 million contracts a day, but that’s where we are. Will the volume ever go back to 2 or 3 million contracts in one day? I think it will… When it crashes.
While You Were Sleeping
Overnight, stock markets in Asia and Europe were very mixed, quiet and choppy. In the U.S. the S&P 500 futures opened Globex at 2390.25 and printed a high of 2391.25 in the first hour. Since then, the futures have been drifting lower. A low was made at 2384.50, and that low has printed multiple times since since the Euro open. As of 7:22 am cst, the most recent print is 2386.75, down 4.50 handles, with 125k contracts traded.
In Asia, 6 out of 10 open markets closed lower (Shanghai +0.71%), and in Europe 7 out of 12 markets are trading higher this morning (FTSE +0.16%). Today’s economic calendar includes Consumer Price Index, Retail Sales, Charles Evans Speaks, Business Inventories, Consumer Sentiment, Patrick T. Harker Speaks, and the Baker-Hughes Rig Count.
Our View
Most of the foreign markets are firm, but the S&P is acting weak. The Friday before mother’s day has the Dow up 15 of the last 22 occasions, and the Monday after has also been up 15 of the last 22. The Monday before the May expiration has been up 22 of the last 29 occasions, with an average gain of +0.40%. I figured there could be some type of pull back / retest of yesterdays lows, and we are seeing a little bit of that weakness this morning.
As I’m writing this, it’s a little after 6:00 am CT, and the ES just made 3 separate lows at 2384.50, and then made another new low by 1 tick at 2384.25. 4 decent sized buys just showed up. Our view is for similar price action from Thursday’s trade; down a little in the beginning of the day, and then a rally. The question is, will the ES hold? I think it will. According to the Stock Trader’s Almanac, the May options expiration is ‘mixed’; down 14 of the last 27. Have a good weekend traders…
PitBull: CLM osc -5/-25 turns down on a close below 4416, ESM osc 5/15 turns up on a close above 24018, VIX osc -2/-16 turns down on a close below 931.
Market Vitals for Friday 05-12-2017
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- In Asia 6 out of 10 open markets closed lower: Shanghai Comp +0.71%, Hang Seng +0.12%, Nikkei -0.39%
- In Europe 7 out of 12 markets are trading higher: CAC -0.02%, DAX +0.13%, FTSE +0.16%
- Fair Value: S&P -2.55, NASDAQ -1.35, Dow -39.21
- Total Volume: 1.3 ESM and 5.2 k SPM traded
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