Trump to Clinton ‘You’re Fired’
It’s 6:00 ET and the battle for the President of the United States is at an end. It has been a bruising three months that most voters would like to forget, but that seems unlikely.
Yesterday, the S&P futures opened at 2122.55, down 7 handles, on the 8:30 ct futures open. After the open the (ESZ16:CME) dropped down to 2119.25, rallied up to 2143.35, sold back off down to 2131.50, rallied back up to 2140.50, then settled at 2135.25, up 5.75 handles on the 3:15 futures close. In terms of the day’s overall trade, it was choppy. In terms of the S&P futures overall, there were buyers on the down ticks, and the tone felt like the ES wanted to go higher.
The ES continued to climb the day after the S&P saw its single largest up day since March. At the end of the day the S&P edged up +0.4%, the DOW Jones futures (YMZ16:CME) closed up 85 points, or +0.40%, and the Nasdaq 100 futures (NQZ:CME) closed up 21 points, or +0.50%. The S&P is up +2.6% in two days. The US 10-year yield rose to 1.867%, gold was lower by $6, closing at 1275.90, the dollar index futures were up slightly, and the Mexican peso futures were continuing their rally.
The real story was not yesterday’s trade, but the overnight session, when Donald Trump not only pulled off a huge surprise, but won states that a Republican has not carried since Ronald Reagan. MrTopStep was writing here over the last few sessions concerning the unreliability of the antiquated method of polling, and how we shouldn’t assume anything, referencing past surprises. Well, last night was one of the huge electoral surprises of history, as evidently there were many voters who came out for Trump.
Buy the Rumor, Sell the News
We also stated that whoever won, there would be a “sell the news” type event, and that’s what we saw last night. The S&P 500 futures went limit down to 2028.50, or -5.0%, a 124 handle drop from the globex high early in the evening. Once it could go no lower, the algos began to target the buy stops, and pushed the futures back up to 2108.75. The ES is currently trading at 2093.50, down 44.00 handles, in the middle of the overnight range, with volume hitting 2.2 million at 6:15 am cst.
Global markets were weak with the Nikkei closing down more than 5%. Between 22 Asian and European markets, only one traded higher overnight. We knew there would be a sell off in the event of a Trump victory, and it looks like the market’s assumed too much. After all is said and done, the risk event in equities may start to be priced in and the S&P’s comes back from this down move, similar to it’s response post Brexit.
While You Were Asleep (If You Slept)
Other market activity overnight includes the USD/MXN, which rallied 8% at it’s highs, the largest move for this pair in 20 years, and now at levels never seen before. Gold futures (GCZ6:CMX) were sharply higher, up $63.00 at one point, to the $1238.00 level before settling back down now to 1302.00. The 10 year Treasury Note traded sharply higher, as did the Fed Fund Rate Futures which suggest a decreased probability of a December rate hike, but as equity markets bottomed, these interest rate futures began to go back to unchanged. At one point in the night crude oil (CLZ6:NYM) was lower by about 5%, down to $43.07, but has bounced back like most other markets, and is now only trading down a few cents on the day.
Overnight ES chart
In Asia, 11 out of 11 markets closed lower (Nikkei -5.36%), and in Europe 10 out of 11 markets are trading lower this morning (DAX -1.46%). Today’s economic reports includes Bank Reserve Settlement, MBA Mortgage Applications, Wholesale Trade, EIA Petroleum Status Report, a 10-Yr Note Auction, Neel Kashkari Speaks, and John Williams Speaks.
Predicting the Unpredictable
Our View: Brexit, the Cubs, and now Donald Trump. What do they have in common? They were all underdogs. None of the main stream media had this one. It’s 6:15 CT and 2.2 million ESZ16’s have traded. The Dow futures were down as much as 800, and now they are down 318.
I was talking to TraderMike last night, he was short 6 (ESZ16:CME) emini S&P futures at 2152.00. He asked me what I thought and I told him to buy at least 3 lots back at ‘limit down.’ He went on to say that this election broke the mold and that all the old rules were being thrown out. That may be right about the US presidential election, but it’s not how it works at limit down in the S&P. For years we saw the futures limit down, and almost 90% of the time they would go offered at the price and then go flying back up, just like they did during the Brexit sell off. Limit down is set up to stop the markets from caving in, and the algos are programmed to buy, not sell, at limit down. After the reopen the S&P almost always pops back up.
Our view, like the title of this section says, this is all about ‘predicting the unpredictable.’ We lean to selling the early rallies. With the futures trading 2107, up 80 handles off their overnight lows, it’s my guess the rally exhausts itself at some point this morning. We may buy weakness later, but not until we see at least a 30+ handle pull back.
As futures traders, it’s best to buy, sell, and not fall in love with your positions, no matter who the president is.
‘The S&P 500 Futures, The Hillary Rally and Dump’
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 11 out of 11 markets closed lower: Shanghai Comp -0.62%, Hang Seng -2.16%, Nikkei -5.36%
- In Europe 10 out of 11 markets are trading lower: CAC -1.60%, DAX -1.46%, FTSE -0,51% at 6:00am ET
- Fair Value: S&P -3.97, NASDAQ -4.78, Dow -58.16
- Total Volume: 1.7m ESZ and 3.6k SPZ traded
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