The S&P 500 futures rallied, then sold off back down to Tuesday’s 2036 globex low, and held again. After a choppy start to the day’s trade, the ESM16 double bottomed off the 2035.50s, and then ripped higher.
At 10:48 ET after the futures went back down and retested the lows I put this out on the ICE chat and the MrTopStep forum:
10:48:45 TRADINGDATA2: (driley) they are showing you their hand.
It seems like anytime the Fed speaks or the minutes are released the markets rally. After the minutes hit the tape saying several participants in the March meeting had expressed concern that an April increase would signal inappropriate urgency, the ESM16 sold off a little, and then rallied all the way up to 2061.50.
S&P 500 Rally: Never Say Die
Leading the charge? Biotechnology stocks were some of the biggest gainers with the Nasdaq Biotech Index up 6%. The second biggest gainers were the energy stocks, with oil trading up to $37.90 a barrel, closing up 5.2%. When you take the two, add in yesterday’s fed minutes saying officials were leaning against an April interest rate increase, and the late day MrTopStep MiM flip, it all added up to higher prices. The US dollar fell against the Japanese YEN, gold closed down 0.50%, and the yield on the 10-year note rose to 1.753, while the CBOE’s volatility index the VIX closed down 8.5% to $14.09.
Overnight the ESM16 traded up to a Globex high of 2062.00 during early evening trade. At 4:40 am CT the ESM16 had sold off down to 2047.50. The same questions that surrounded the market two or three weeks ago are the same questions we have now. Can the S&P keep going up like it has been doing over the last 7 or 8 weeks? With the seasonalities pointing to a strong April, the PitBulls Thursday / Friday low (today and tomorrow) the week before the April options expiration, and the S&P cash study showing a positive options expiration next week, the overall feeling is that the S&P could go higher next week. Below is a copy of the expiration study.
[gview file=”https://mrtopstep.com/wp-content/uploads/2016/04/April-2016-Expiration-Stats.pdf”]
Gut Feel
No matter what anyone says, these are very tough markets. A 12% drop in the beginning of the year and a 13% rally all in the first three months of the year. Clearly the Fed’s inability to raise interest rates, and all the global quantitative easing has helped stocks recover, but I am still in the boat that says the S&P makes some type of high going into the early parts of the summer. Can the ES trade up to new highs? I can’t rule that out, but I do not think the S&P will keep going straight up. There will be further letdowns in 2016. That said as traders we have to deal with the here and now, and possibly more upside next week.
In Asia, 7 out of 11 markets closed higher (Shanghai Comp -1.38%), and In Europe, 7 out of 12 markets are trading lower this morning (DAX -0.26%). Today’s economic calendar includes Weekly Bill Settlement, Chain Store Sales, Jobless Claims, Bloomberg Consumer Comfort Index, EIA Natural Gas Report, 3-Month Bill Announcement, 6-Month Bill Announcement, 3-Yr Note Announcement, 10-Yr Note Announcement, 30-Yr Bond Announcement, Consumer Credit, Treasury STRIPS, Fed Balance Sheet, Money Supply, Janet Yellen Speaks, and Esther George Speaks.
“When the Fed Speaks, The World Listens”
Our View: The markets can run but not hide. At some point, the current upside part will come to an end, but that doesn’t necessarily mean it will happen today or next month. Today Janet Yellen, Ben Bernanke, Alan Greenspan, and Paul Volcker are in NY at an event titled “When the Fed Speaks, The World Listens” at 4:30 CT, and there’ll also be more comment from Fed members later in the evening when Kansas City Fed President Esther George speaks at 7:15 p.m. CT. Our view, sell the rallies with tight stops. If the ESM gets under 2036 we could see a quick drop down to 2022-2024. In Asia, Japan’s Nikkei closed up +0.22%, the Shanghai Composite in China closed down -1.35%. In Europe, the pan European Stoxx 600 Index was down 0.44 percent as the session opened.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets closed higher : Shanghai Comp -1.38%, Hang Seng +0.29%, Nikkei +0.22%
- In Europe 7 out of 12 markets are trading lower : CAC -0.32%, DAX -0.22%, FTSE -0.08% at 6:15am CT
- Fair Value: S&P -7.33, NASDAQ -8.63, Dow -92.39
- Total Volume: 1.89mil ESM and 4.8k SPM traded
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