Yesterday the S&P 500 futures saw the largest daily decline since the February 11th bottom as the major equity indices saw the largest sell programs in several weeks. The ESM16 finally made it’s way lower taking out some modest support areas which included Tuesday’s 2028.75 low and Friday’s 2027.00 low. What became clear was that, after multiple failed attempts to trade up to 2050, this market has exhausted buyers.
Overnight the futures continued their orderly dive as markets worldwide continued to be offered. The ESM16 bled throughout globex, and just made a low of 2016.25, down 12.5 handles. Gold futures (GCJ6) are also down $5.00 to $1219.00, and crude oil (CLK6) traded lower to $39.00, down .80 cent on the day. Meanwhile, risk off assets, such as treasury bonds, are only trading higher by less than .15% up to 163.22 on the ZBM16.
For two days we mentioned that if the S&P futures would trade below Friday’s globex low of 2027 that we expected a test of the 2000 area, and yesterday I came out on Twitter telling my followers that the next 60 handles from 2040 were down, meanwhile I shared with the room an options put trade on the S&P 500 that would pay on such a dip over the next few sessions. It looks like the index has a clear path to 2000, perhaps 1980, and possibly quite a bit lower, as we have been showing signs in the Opening Print since last week that the markets are at significant resistance.
In Asia, 10 out of 11 markets closed lower (Shanghai Comp -1.63%), and In Europe 10 out of 12 markets are trading lower this morning (DAX -1.44%). Today’s economic calendar includes James Bullard Speaking, Durable Goods Orders, Jobless Claims, PMI Services Flash, Bloomberg Consumer Comfort Index, EIA Natural Gas Report, Kansas City Fed Manufacturing Index, 3-Month Bill Announcement, 6-Month Bill Announcement, 52-Week Bill Announcement, 2-Yr Note Announcement, 5-Yr Note Announcement, 7-Yr Note Announcement, Fed Balance Sheet and Money Supply
Our View: After a six week rally, and into the final trading day of March and the end of the first quarter of 2016, the S&P is finally starting to pull back. While the the S&P does act weak, I still think we could see lower prices into the end of the quarter rebalance, the day before Good Friday (today) shows it as an up day. That said, we think that after the initial move this morning, the markets should get real quiet. Based on the overall volume most traders have already cut back for the Easter Holidays. Our view remains unchanged. At 2040 we said the next 60 handles was down, and that means 1980 is on tap. You can take it from there.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 10 out of 11 markets closed lower: Shanghai Comp -1.63%, Hang Seng -1.31%, Nikkei -0.64%
- In Europe 10 out of 12 markets are trading higher: CAC -1.87%, DAX -1.44%, FTSE -1.38% at 5:30am CT
- Fair Value: S&P -9.22, NASDAQ -10.85, Dow -102.40
- Total Volume: 1.5mil ESM and 3k SPM traded
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