Whether you agree or disagree, whether you like it or not, the election of Donald Trump has not only turned the world upside down, it has sent the S&P to near new all time highs. They say the markets do not like uncertainty, well if there is only one thing that is certain, it’s that the new administration has, and will, shake things up.
What is it that people look for when reading about the stock, futures, and options markets? Is it catching up on news that you already heard about? Is it keeping up with the trends and jumping on board with what’s hot? Like it or not, the things we used to use to make money do not work anymore, and the ones that do only last as long as it takes the algo firms to code it. While it sounds funny, and a tad snappy, the introduction I do on Periscope is quite real; these are not our fathers markets, nor are these his charts.
I knew technology would some day eat up the trading floor, but they have stayed open a lot longer than anyone thought they every would. Are the few locals and the one or two order fillers in the S&P pit out of step with the current trading environment and have no idea? Or are they the smart ones? They held their ground, and still make money doing it, so who is right?
What about all the open outcry option pits that are still open on the floor? Why is it that some customers prefer ‘calling the pit’ over plugging the trade into CQG or TT? Are those traders living in the past? Or is it that they still make money the old way? My guess is the latter.
As things continue to evolve, the order fillers, locals, market markets and clerks understand that time is of the essence, but they also would not be there if they didn’t make money. Like I always say, there are 3 types of people left on the floor. The guy on the phone that has the customer that puts the order into the pit, the broker that fills the order, and the market maker that takes the other side of the trade. Some may be laughing that the traders left on the floor are obsolete and out of touch with reality, I say stay until they turn out the lights.
On December 30, 2016 the CME Group will be closing the NYMEX trading floor. To my comrades in arms, I salute you. It was not from a lack of effort that the floor traders and order fillers didn’t put up a good fight. Electronic trading just ate up the floor, as it will someday do in Chicago. I think the NY traders would say the same thing to the CME traders in Chicago… stick it out as long as you can. If you are still making cash don’t walk, but start planning ahead.
The trading floors of NY and Chicago brought forth some of the most hardworking, colorful, fun people in the world. It didn’t matter if we were in Paris or Dubai, people knew who we were. We ate and drank big. We spent big and partied like it was 1999. Sure Chicago and the New York exchanges were rival, but in the end, it’s like the old saying goes; ‘Old traders don’t die, they just drift away.’ So, let’s not forget all the years.
Friday’s trade was more of the same pre holiday chop. The ESZ opened the regular session at 2185.50, up three ticks, and traded up to a new contract high at 2187.50. In the latter part of the morning the futures broke down to 2177.50, an exact 10 handle rule retracement, before trading sideways for the remainder of the session and settling at 2180.25.
Overnight equity markets in Asia and Europe showed a mixed to solid bid. The S&P futures opened globex at 2179.50, made an early high in the Asian session at 2185.50, then traded back through the open to a low of 2179.25 soon after the Euro open. The ES traded back to a 2186.00 high and is currently sitting a handle off that high at 2185.00, up 4.00 handles on the day, with just over 100k contracts traded at 6:23 am cst.
This week’s abbreviated trading is likely to see more of the same; lower volume, tight ranges and chop, giving the market a thin-to-win type feel. The calendar is quiet today and tomorrow and get’s busy Wednesday, but it likely won’t make any difference to the holiday chop.
In Asia, 6 out of 11 markets closed higher (Shanghai +0.79%), and in Europe 9 out of 11 markets are trading higher this morning (DAX +0.41%). This week’s economic calendar features the FOMC minutes and includes 17 other reports, just one Fed speaker, and 12 U.S. Treasury bond/note/bill events with equity markets closed on Thursday and open half day on Friday. Today’s economic calendar includes Stanley Fischer Speaking, Chicago Fed National Activity Index, a 4-Week Bill Announcement, a 3-Month Bill Auction, a 6-Month Bill Auction, and a 2-Yr Note Auction.
Positive Backdrop
Our View: The trading rule for the week is to come in long and sell on Friday. With the S&P futures 6 points (handles) off the all time contract high. and so many buy stops above. we find it hard not to think the ES won’t run the stops to new highs and beyond. Crude oil jumped up to $47.39 with Putin saying there is ‘a strong likelihood that OPEC deal will be achieved.’ This should help keep the S&P in line. Our view is that there are is a big line of buy stops that starts above 2188.70 and basically goes to 2197-2198. My gut tells me those stops are dead ducks. The next set of buy stops starts above 2199 and goes to 2106 – 2107.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets closed higher: Shanghai Comp +0.79%, Hang Seng +0.06%, Nikkei -0.13%
- In Europe 9 out of 11 markets are trading higher: CAC +0.55%, DAX +0.41%, FTSE +0.37% at 6:00am ET
- Fair Value: S&P -2.40, NASDAQ -1.72, Dow -31.40
- Total Volume: 1.28m ESZ and 3.5k SPZ traded
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