The victory for Donald Trump has been a victory for the S&P. In 65 days, Donald Trump will be inaugurated, and will take over the oval office as the 45th President of the United States. A lot is going to change, some of it will be good and some and some of it will be bad, but all of it will be market moving. Trump talked about putting millions back to work through infrastructure programs during his victory speech.
“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals,” Trump said. “We’re going to rebuild our infrastructure — which will become, by the way, second to none — and we will put millions of our people to work as we rebuild it.”
While the banks will benefit from theses types of programs, so will the big industrial companies and the steel companies. I didn’t have to hear this from CNBC or the Wall Street Journal, I got this directly from one of my cousins who was been working for some of the largest steel companies in the US, and he says steel has rallied 20% in the last two days.
While most of us never think about steel, it will play a big part in the rebuilding of America. My cousin went on to say that it would not be impossible for Trump to carry through on his promise and we see some kind of supply squeeze as steel prices move higher. I know this doesn’t have much to do with the overall price action of the S&P, but it shows how money is starting to show up in places most of us would not think of.
Yesterday’s 16.75 handle rally off the lows was what I call a perfect storm. Thin to win meets the mid-month rebalance (Nov. 15.). That, combined with crude oil futures (CLZ16:NYM) being up over +5.6%, made for an all day non-stop buy program. One of the things I pointed out to the PitBull was how much the intramarket equity future spreads have been moving. Yesterday, it looked like the trade was to buy the Nasdaq 100 future (NQZ16:CME) sell the Dow Jones futures (YMZ16:CBOT), or the NQZ/YMZ spread. It also looked like the buy (ESZ16:CME) / Sell (YMZ16:CBT) trade was happening at the same time.
While most day traders do not really think about trading intermarkets spreads, they used to be very popular on the trading floor. The spreads were done with ratios, like buy 1 NQ to selling 2 ES, or the Dow / S&P spread, 3 Dow futures to 2 ES. While most of you do not look at these spreads, it’s really a good way to follow how money moves from one index to the next.
At the end of the day, yesterday was more of the same, where volume gets lower and price chops near the top of the historical range. That being said, was an early small sell opportunity, and then a bid back up throughout the day to take it to a new high of day. These types of thin-to-win trades require patience, but as we move into the Thanksgiving holiday, I expect we see more of the same.
Overnight equity markets in Asia and Europe were mostly sideways to lower. The S&P futures did trade up to a high of 2185, which is the new high on the December contract. However, after making the high early in the globex session, before the Tokyo open, the futures did slip the rest of the night. The ES traded to down to 2172.00 just now, down 7.25 handles, on volume of 142k at 6:10 am cst.
Today’s calendar is fairly active, and so have been the future’s in the overnight trade. The task is for bulls to now build a floor of support at what was resistance at 2170.00, and try to push back near the globex high today. However, bears woke up today to find a vulnerable appearing market, and if they can push the open below 2170, and then take out 2164 early, they have a shot at 2158 by late morning or afternoon.
In Asia, 6 out of 11 markets closed lower (Nikkei +1.10%), and in Europe 7 out of 11 markets are trading lower this morning (DAX -0.37%). Today’s economic reports includes James Bullard Speaks, MBA Mortgage Applications, Neel Kashkari Speaks, PPI-FD, Industrial Production, Atlanta Fed Business Inflation Expectations, Housing Market Index, EIA Petroleum Status Report, Treasury International Capital, and Patrick Harker Speaks.
Our View: I think today could be a down day. The ES has gone too far, too fast. Do I think the ESZ will go flying through 2200? Yes, I do, but not today. I have to admit I have had a hard time with the extended sell offs and rallies. That said, today we have a fairly active economic calendar, and my gut says (unless it gets real slow today) to sell the rallies today. The drop from 2185 down to 2169.00 on Globex overnight doesn’t look all the bullish.
According to Tom DeMark, the Trump rally was to be followed by a stock-market tumble. He said Tuesday night the Dow could hit 19,000 in the next few sessions, but then fall. DeMark said the S&P could hit 2213 by today, ‘followed by a correction’. “Expectation is for U.S. stocks to endure at least 11% decline after top recorded,” he said. DeMark went on to say he sees the Dow Jones Industrial Average possibly rising as far as 19,434 in a “1-2 day blow-off.”
Read the full Tom DeMark story here
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets are trading lower: Shanghai Comp -0.06%, Hang Seng -0.19%, Nikkei +1.10%
- In Europe 7 out of 11 markets are trading lower: CAC -0.38%, DAX -0.37%, FTSE -0.44% at 6:00am ET
- Fair Value: S&P -2.54, NASDAQ -1.15, Dow -33.73
- Total Volume: 1.4m ESZ and 5.3k SPZ traded
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