I am not real sure what the exact reasons are, but the S&P 500 futures (ESZ17:CME) is stuck in a 10 handle (point) trading range, give or take a few. Does it have to do with global risk, or is it interest rates, or the dollar? Whatever it is, the VIX is not showing much fear, and the way I see the price action, it has been ‘back and filling’ for the last two weeks. I thought the ES could make new highs this week, and when it shot up to 2505.00 yesterday it looked pretty good, but like i said on the MrTopStep chat before the open, sellers would show up on the gap, and that is exactly what they did.
Republican Tax Plan Unveiled
The reason they did was the tax framework showed that the plan proposes to reduce the tax rate on businesses and many individuals. The problem for the stock market was that traders were skeptical that a tax overhaul will pass.
Yesterday, the ES rallied on Globex, the total range was was 2494.25 to 2503.00, with 200,000 ES traded before the 8:30 CT open. The first print was 2503.00, after which the ES traded up to 2505.00 at 9:00 am CT. After that, several sell programs pushed the ES down to its support at 2493.00 at 10:00 CT. From there, it stutter stepped up to 2498.50, pulled back down to 2495.75, and then popped above the vwap to 2500.00 at around 12:30.
While the fed has made it clear to gradually raise interest rates yesterday, the bond market was signaling something different, as investors continued to bet on higher U.S. interest rates. The CBOT’s fed funds contract, which showed a 73% chance of a December rate hike a week ago, jumped to 83%, which helped support bank stocks ( B of A +2.80%, CitiGroup +$2.35%, JPMorgan Chase + 1.75% and Wells Fargo +1.10%).
At 1:14 pm CT, the ES traded up to 2505.00, and then up to 2508.00 a few minutes later. At 1:20 total volume was only 1.1 million contracts traded. After a small pull back down to 2505.25 the ES traded up to a new high at 2509.25 as the MiM flipped from buy $190 million to sell $96 million MOC. After the flip the ES sold backed off down to 2503.50.
In the end it was a very good day for the markets. Despite some late profit taking the S&P 500 futures (ESZ17:CME) settled at 2504.50, up +9.00 handles, or +0.36%, the Dow Jones futures (YMZ17:CBT) settled at 22298, up +39 points, or +0.17%, and the Nasdaq 100 futures (NQZ17:CME) settled at 5941.00, up +48.50 points, or 0.82%, and the Russell 2000 (RTYZ17:CME) settled at 1487.90, up +2.01% on the day.
While You Were Sleeping
Overnight, equity markets in Asia traded modestly lower, with the Hang Seng leading the way down at -0.80%. Meanwhile, in Europe, stocks are trading modestly higher this morning, with the OMX index up +0.43%.
In the U.S., the S&P 500 futures opened last night’s globex session at 2503.25, and was held to just a 4 handle range for most of the night. Just after 6:45 am CT, the ES broke out to the downside, and printed a new low at 2499.50. As of 7:10 am CT, the last print in the ES is 2500.25, down -4.25 handles, with 131k contracts traded.
In Asia, 9 out of 11 markets closed lower (Shanghai -0.15%), and in Europe 9 out of 12 markets are trading higher this morning (FTSE -0.22%).
Today’s economic includes GDP (8:30 a.m. ET), International Trade in Goods (8:30 a.m. ET), Jobless Claims (8:30 a.m. ET), Corporate Profits (8:30 a.m. ET), Bloomberg Consumer Comfort Index (9:45 a.m. ET), EIA Natural Gas Report (10:30 a.m. ET), Kansas City Fed Manufacturing Index (11:00 a.m. ET), Farm Prices (3:00 p.m. ET), Fed Balance Sheet (4:30 p.m. ET), Money Supply (4:30 p.m. ET) Fedspeak — Esther George Speaks (9:45 a.m. ET); Earnings — McCormick & Co. (6:30 a.m. ET), Vail Resorts (6:45 a.m. ET), BlackBerry (7:00 a.m. ET), Rite Aid (7:00 a.m. ET), Accenture (7:01 a.m. ET), Conagra Brands (7:30 a.m.), KB Home (8:30 a.m. ET).
New Highs = Pull Back Time, Don’t Get Bullish Into The Big Rally When The Ship Has Already Sailed
Our View: Well, all the ‘back and filling’ finally took hold, with the S&P running to new all time highs. Today there is a high level of economic and earnings reports to get past, and once it does, I still lean to higher prices. There is a ‘but’ in all this though, and with all the news about the failed health care push, and the tax plan out in the open, it’s possible we see some selling.
Our view is that you can sell the early rallies, especially if the futures gap higher, or just wait for the pullbacks and buy weakness.
Market Vitals for Thursday 09-28-2017
[gview file=”https://mrtopstep.com/wp-content/uploads/2017/09/Market-Vitals-17.09.28.pdf”]
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 9 out of 11 markets closed lower: Shanghai Comp -0.15%, Hang Seng -0.80%, Nikkei +0.47%
- In Europe 9 out of 12 markets are trading higher: CAC +0.03%, DAX +0.30%, FTSE -0.22%
- Fair Value: S&P -2.31, NASDAQ +4.89, Dow -52.13
- Total Volume: 1.57mil ESZ & 3.3k SPZ traded in the pit
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