After a low volume, 10 range trade during Sunday night’s globex session, the S&P 500 futures (ESU17:CME) opened Monday’s 8:30am CT cash session at 2421.00, -1.50 handles, and the Nasdaq 100 futures (NQU17:CME) opened up at 5664.00, up +8.25 handles.
The ES spent most of the first hour stuck in a 4 handle range between 2424.00 and 2419.00, while the NQ was able to extend its overnight range with a new low at 5650.00. Eventually, both futures found support at Friday’s settlement prices, and a slow grind higher started.
Just after 10am CT, the ES printed a mid-morning high at 2427.50, and the NQ traded up to 5687.75. After a minor pullback to 2425.25 the ES continued to slowly inch higher. A little after 12:00pm, the ES had traded up to the globex high at 2429.25, but was unable to break through.
By 1:30pm only 610k ES contracts had traded. If you subtract 150k from Globex, it comes to 460k traded on the day session, then take out 70% for the algos, and you’re left with 138k contracts. That’s pretty low. Things continued this way heading into the cash close. There was a selloff down to 2424.25 when the MiM came out showing just over $500 million to sell, but that was about all the action we saw in the second half of the trading session.
In the end, the S&P 500 futures (ESU17:CME) settled at 2424.50, up +2.00 handles, or +0.08%, the Dow Jones futures (YMU17:CBT) settled at 21359, up -11 points, or -0.05%, and the Nasdaq 100 futures (NQU17:CME) settled at 5694.00, up +38.25 points, or +0.67%.
Blame the Bots
The continuous expansion of algorithmic trading in energies has a lot of analysts and investors scratching their heads. Nothing seems to work anymore… It’s becoming another blurred, unpredictable market.
According to Stephanie Yang and Timothy Puko of the Wall Street Journal:
Oil investors, who make bets relying on data like production and demand, say that such forces are no longer always driving crude prices. They say program trading is distorting the market, often causing shallow price drops to accelerate.
Yang and Puko also went on to say that:
Although automated trading has swept stock and bond markets for years, it has only recently accounted for the majority of trades in energy.
Automated trading in energy-related contracts accounted for 58% of volume from late 2014 to late 2016, compared with 47% in the preceding two-year period, a March study by the Commodity Futures Trading Commission shows.
This game we play is forever evolving…
While You Were Sleeping
Overnight, equity markets in Asia were mixed, with a slight bias to the upside, and were led by the Hang Seng, which closed higher by a whopping 1.48%. Meanwhile, in Europe, most major index markets are trading lower this morning, as it would appear many traders are awaiting Yellen’s testimony in front of Congress tomorrow.
In the U.S., the S&P 500 futures had another fairly uneventful night. The ES opened the globex session at 2423.75, and immediately made an early low at 2422.50. From there, it was a steady grind higher for most of the Asian session, topping out at 2427.75 around 1:15am CT. There was a small pullback to 2425.50 before a double top was printed at 2427.25, and then a dip down to 2422.75 began as European markets were opening.
Things got weaker from there for the S&P 500. After a minor retracement to 2424.75 at 4:15am, the ES continued to slowly break, eventually finding a low at 2421.75, and extending the overnight range to 6 handles. As of 6:30am CT, the last print in the ESU is 2422.25, down -2.25 handles, with 93k contracts traded.
In Asia, 6 out of 11 markets closed higher (Shanghai -0.29%), and in Europe 10 out of 12 markets are trading lower this morning (FTSE -0.78%). Today’s economic calendar includes NFIB Small Business Optimism Index, Redbook, JOLTS, Wholesale Trade, a 4-Week Bill Auction, Lael Brainard Speaks, a 3-Yr Note Auction, and Neel Kashkari Speaks.
Our View
Yesterday’s call to buy any early weakness, and position short midday after the rally, is working pretty well right now. The Monday stats worked nicely, but Tuesday has shown weakness; down 7 of the last 9, and 13 of the last 18 weeks. We think today is ripe for at least a 10 handle drop from the open.
Buying dips has worked, as it’s been about three weeks since the S&P’s have had back to back down days, so we like buying late morning weakness today, and positioning to hold into tomorrow.
After this back and fill, we are seeing buy stops build above 2430 that can quickly push this market up to 2440, and then target the 2451.50 all time high print. To the downside, we see stops building from 2405 to 2400 that will lead at least to a push down to 2390.
PitBull: CLQ osc -4/-3 turns up on a close above 4668; ESU osc -9/-3 turns up on a close above 239960; VIX osc 10/3 turns up on a close above 1391.
Market Vitals for Tuesday 07-11-2017
[gview file=”https://mrtopstep.com/wp-content/uploads/2017/07/Market-Vitals-17.07.11.pdf”]
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 -0.29%, Hang Seng +1.48%, Nikkei +0.57%
- In Europe 10 out of 12 markets are trading lower: CAC -0.09%, DAX +0.22%, FTSE -0.76%
- Fair Value: S&P -2.34, NASDAQ +2.42, Dow -52.20
- Total Volume: 860k ESU, and 875 SPU traded
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