- Yields and Dollar climb as budget plan passes Senate
- Banks rally on budget hopes
- Global stocks continue to rise
- Nikkei on longest win streak in nearly 57 years, Up 15 sessions in a row
Its all seems too unbelievable. The global markets keep going up. Forget the crash idea, the markets don’t even pull back. Wednesday night, the S&P 500 futures traded down to 2542.50 on Globex, and rallied up to 2561.50 on Thursday. On Thursday night the Senate passed a budget proposal, and the ES traded all the way up to another ‘new all-time’ contract high at 2571.75. Mitch McConnell (R., Ky.), Senate Majority Leader, said ‘Passing this budget is critical to getting tax reform done, so we can strengthen our economy after years of stagnation under the previous administration.’ The dollar rallied and European shares advanced.
Just before Friday’s 8:30 am CT futures open, total Globex volume in the ES was 270,000. On the bell, the ES traded 2569.00, rallied 1 handle up to 2570.00, and then dropped down to 2566.00. After the low, the ES rallied up to 2569.50, retested the 2566.00 level, and then rallied all the way up to 2573.25. With the exception of the two early drops, and a couple of 2 handle pullbacks, the ES went straight up. The problem was, if you didn’t buy the early pullbacks, you were pretty much locked out.
Late in the day, the MiM was showing over $450 million to buy, and the ES dipped down to 2569.75 before flying back up to trade and close at another new all-time high at 2574.50. News had hit that front runner Jerome Powell is likely to become the next head of the fed.
In the end, the S&P 500 futures (ESZ17:CME) settled at 2574.00, up +13.50 handles, or +0.52%; the Dow Jones futures (YMZ17:CBT) settled at 23277, up +163 points, or +0.70%; the Nasdaq 100 futures (NQZ17:CME) settled at 6111.00, up +13.25 points, or +0.21%; and the Russell 2000 (RTYZ17:CME) settled at 1510.30, up +7.40 points, or +0.49% on the day.
Feel & Flow
As most of you know I love writing about that markets, but it’s been getting harder due to the non-stop upswing. As the title above says, the current rally is the third largest in history. Last weeks overnight selloff was just another short term blip on the screen that caught the short sellers with their pants down.
While I understand that my newsletter is not the most technical, it really isn’t meant to be. Like, during Saturday’s FX webinar, when Ryan Littlestone said he follows flow to help him make his trading decisions. While I am sure that is not all he follows its very much like what i do. I follow volume and news. My charts are imbalance charts, they show the the exact number of contracts that trade on the ‘bid and offer,’ and net it out. When I see the ES or NQ drop, and it shows big net buys, I look to be a buyer. I also look for retests. If the ES bounces off a low and comes back down, and I see buyers filtering in, that is my signal to get long.
I understand it’s not the most technical advice, and I also understand that there are a lot more indicators traders can use, like moving averages, put / call levels, pivots, overbought and oversold conditions, old highs and lows, but at the end of the day, the S&P has been going up since it made its low since March of 2009, and it really does not show any major signs of retreating. So for me (and I do make mistakes), I still believe that being a trend follower is the golden rule. Until there is a major structural change, or a war, I think it’s going to continue to be ‘business as usual’, an under invested public waiting to buy the dip that seemingly never comes.
Automation on Wall Street Is Coming Sooner Than You Think
An article on Bloomberg last week said it all. After the credit crisis hundreds of thousand of people lost jobs on Wall Street and in the financial sector, brokerage companies and banks. When the public questions why volume is so low, there is a good reason for that. All the new regulation shut down most, or all, of the bank prop trading desks, and hedge funds don’t make money. Just think how many ES contracts JPMorgan, Goldman and UBS used to trade for their own account. Think of all the desks that used to make prices, and all the options and futures they used to use to lay off the risk of the position they took the other side of when a customer called up and wanted a price on 100,000 shares of IBM?
It’s all gone, and no matter what President Trump says about lowering some of the regulations, it’s not coming back. I still talk to ‘traders’ at some of the banks, most of the guys that are left do not go to work to take on risk, they go to turn on the computers before the open and turn them off after the close. The computers make all of the trading decisions. I have always wondered how long the traders that were left would remain in those positions, but the Bloomberg story below answers that question…
More Wall Street Jobs Vulnerable to Being Wiped Out
Wall Street firms are pushing to develop software that can suggest trades and structure complex hedges, long the domain of stock pickers and derivatives sales staff. Firms are also experimenting with automated analysis of legal documents. Some investors and executives have been predicting major job losses once people are replaced. Bloomberg’s Saijel Kishan, Hugh Son and Mira Rojanasakul mapped out exactly which jobs are vulnerable to being replaced by computers—and when. The good news for humans: Robots haven’t been as quick to figure out markets where trading is sometimes opaque or volume is low, such as credit trading. More liquid markets, such as equities and currencies, are easier to master.
Read the full article here, and dont forget to watch the video.
While You Were Sleeping
Overnight, equity markets in Asia and Europe traded higher across the board, with Japan’s Nikkei closing higher for the 15th consecutive day.
In the U.S., the S&P 500 futures opened last night’s globex session at 2572.75, and was held to a 5.25 handle range. As of 7:15am CT, the last print in the ES is 2575.50, up +1.50 handles, with 144k contracts traded.
In Asia, 9 out of 11 markets closed higher (Shanghai +0.11%), and in Europe 11 out of 12 markets are trading higher this morning (FTSE +0.23%).
Today’s economic calendar includes the Chicago Fed National Activity Index (8:30 a.m. ET); Earnings –Hasbro (6:30 a.m. ET), Halliburton (6:45 a.m. ET), State Street (7:00 a.m. ET), VF Corp. (7:00 a.m. ET), Kimberly Clark (7:30 a.m. ET), Illinois Tool Works (8:00 a.m. ET), Seagate Technology (8:00 a.m. ET), Arconic (4:05 p.m. ET), Whirlpool (4:30 a.m. ET).
200 Companies In The S&P Report Earnings This Week
Our View: It’s going to be a big week. According to FactSet, 200 companies in the S&P 500 are scheduled to report third-quarter results. Of the S&P 500 companies that have reported, three-quarters have topped estimates. There is also a pickup in economic reports this week, and some fed speak.
2575, 2580, 2600, 2630… They are just numbers now, who knows when this is going to stop. While global investors continue to look for safety in the yields from the bond market, the global stock markets continue to steamroller along.
Our view; the S&P, Dow and Nasdaq are all overdue for a pullback, but was that pullback last week? I don’t think so. We are sticking to what we have been saying for weeks, you can sell the gap up open or the first rally above the gap, or just wait for a pullback and be a buyer. This party is not over…
Market Vitals for Monday 10-23-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 9 out of 11 markets closed higher: Shanghai Comp +0.11%, Hang Seng -0.64%, Nikkei +1.11%
- In Europe 11 out of 12 markets are trading higher: CAC +0.52%, DAX +0.38%, FTSE +0.23%
- Fair Value: S&P -2.24, NASDAQ +0.41, Dow -51.04
- Total Volume: 1.25mil ESZ & 374 SPZ traded in the pit
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