It’s been a case of failed rallies in the S&P over the last several weeks, and volatility is up. The ESZ16:CME is moving all over the place, but still has not broken down under its most recent low at 2100 set on September 12th. While I look at several things that help me determine market direction, it’s my gut that’s telling me that the markets are weak.
Looks Bad? Buyem
The S&P 500 futures sold off on Friday’s close, then sold off again right after the Sunday night Globex open. Weakness in Asia rolled into Europe, and then into the S&P. The futures short covered before the 8:30 open and had an early rally up to 2130.00. The ES quickly sold off down to the vwap at 2123.75, bounced, then ‘double bottomed’ at 2120.75, completing a MrTopStep 10 handle rule. After that there was a bounce back up to 2129.00, and then they started hitting sell stops under 2122.00, down to a new daily low at 2117.75. From 10:00 ct to 1:00 ct the ES was in a 4 to 5 handle trading range. We said in yesterday’s Opening Print that we expected an increase in volatility, and despite some narrow chop,the ES is seeing some big intraday moves. This week is the October options expiration week and we expect to see continued volatility.
Late in the day the ES bounced off the lows, failed to regain the vwap at 2123.00, and started selling off into the 2:45 cash imbalance. What happened going into the the end the day’s trade was a great example of what I call ‘volumeless trade.’ While there were a few sell programs, the bid/offer of the ESZ was 100 to 300 up all day. There is a saying about ‘never short a quiet market,’ and while some people made money shorting yesterday, what often times happens on these type of days is that when the futures look weak into the close they often reverse suddenly and that’s what happened yesterday. At the end of the day, the ESZ pushed back below 2120 down to 2118.50 before reversing into the futures close ,rallying up to 2124.50 just before 3:15.
While You Were Alsleep
Overnight, global stock markets in Asia and Europe traded higher as “Turnaround Tuesday” placed the major markets up on the week. The S&P 500 futures opened globex at 2122.50, made a low of 2120.25 on the open, and then proceeded to bid up. The ES is currently trading at 2133.00, up 9.75 handles, with 117k contracts traded at 6:07 am cst.
Positive Earnings Rip
On the close Netflix (NLFX) reported better than expected earnings pushing the stock up over $20.00. This morning, Johnson & Johnson (JJ) beat expectations, also BlackRock (BLK) reported a beat on EPS, but a miss on revenue expectations as the CEO stated that “It’s a tough time for our clients in low-rate environment.” With morning earnings under way this morning there will be no shortage of news but the S&P it starting to hit the resistance are from the bottom of the prior range and the overnight high up at 2135 will be key for bulls to retake early in the cash hours.
In Asia, 10 out of 11 markets closed higher (Nikkei +1.38%), and in Europe 11 out of 11 markets are trading higher this morning (DAX +1.22%). Today’s economic reports include Consumer Price Index, Redbook, Housing Market Index, a 4-Week Bill Auction, and Treasury International Capital and earning from JNJ, GS, INTC, YHOO and more.
TurnAround Tuesday
Or view: If you want to be a good trader, you have to be willing to be a contrarian. The ES was not far off its low of the day going into the close, then out comes Netflix. Then the ES starts moving up overnight backed by sharply higher closes out of Asia and Europe. I still think the markets have a ‘funny’ feel, but that doesn’t mean the S&P can’t go up.
Download all of the October expiration stats here.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 10 out of 11 markets closed higher: Shanghai Comp +1.40%, Hang Seng +1.55%, Nikkei +1.38%
- In Europe 11 out of 11 markets are trading higher: CAC +1.19%, DAX +1.22%, FTSE +0.97% at 6:00am ET
- Fair Value: S&P -6.24, NASDAQ -7.36, Dow -91.18
- Total Volume:1.25m ESZ and 2.3k SPZ traded
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