There has been a high level of anxiety hanging over the S&P 500 futures as of late, and it all seemed to start the week of President Trumps failed health care bill. Then, it was a batch of weak data, and most recently, the US firing of 60 cruise missiles into a Syrian military base, and last but not least, Trump ordering a ‘naval strike force’ to the Korean Peninsula while Secretary of State Tillerson is in Russia for talks.
ALGO’s Have A Field Day
The S&P 500 futures (ESM17:CME) traded 2349.00 on the 8:30 CT futures open and initially rallied up to the days high at 2351.75. From there the futures got hit by a series of large sell programs. It seemed like after every low there was a small bounce and then the futures would sell back off. It was all sell stops and sell programs.
After making several early lows the (ESM17:CME) traded all the way down to 2333.25, down 19.50 handles on the day, and then started to rip higher. By 12:00 the (ESM17:CME) traded all the way up to 2349.50, down only 2.25 handles on the day. After trading back to the 2349.00 level the ES ‘stutter stepped’ back down below the vwap at 2342.00 and started to rip higher again. The MiM went from a ‘small to buy’ to over $700 million to buy. The (ESM17:CME) traded up to a new daily high at 2351.50, down only 1.25 handles, on the 3:15 CT futures close.
The S&P futures went from an early 19.50 handle sell off to a 18.25 handle rally. In terms of the overall tone, the ES could not have looked worse early in the day, and could not have looked better later on. In terms of the day’s overall volume, there was 1.84 million ES contracts traded on the day, which would be considered a high level of contracts traded. When you take yesterday’s total volume of 1.85 million contracts and you take out the 175k from Globex that equals 1.675 million, but when you take out 70% for the algorithmic and high frequency trading, total customer volume is only 502k. That means that algorithmic trading made up 1.17 million contracts yesterday.
In the end it was a day dominated by a high level of anxiety and algorithmic and HFT trading programs. As the PitBull says, ‘The S&P is like water in the bath tub, push the water one way and the push it the other way’.
Gold Reacts To Global Risk
I do not do this very often, but I made a call two weeks ago that gold was going to $1350.00, and possibly $1400.00. Yesterday, gold spiked around 8:00 am ct when a correspondent from Reuters reported seeing black smoke at the airport in Moscow as U.S. Secretary of State Rex Tillerson’s plane was set to land. The smoke ended up being burning garbage, but it was enough to spook gold higher.
Even after it was said that there was not an emergency, gold continued to move higher. The ruble also declined sharply against the dollar, and gold jumped from 1260 to 1266. NYMEX gold futures made a high at 1268.80, up 1.2% on the day, and up 9% in 2017. Other factors helping push gold higher are geopolitical concerns surrounding the Syrian missile attack and saber rattling by the U.S. and North Korea. Clearly traders have been moving back into the precious metal as safe haven.
While You Were Sleeping
Overnight, Asian markets had a mixed tone, followed by Europe which saw a mostly higher market. In The U.S., the S&P 500 futures opened the globex session at 2351.75 and traveled lower, printing a double bottom at 2345.50 early in the Tokyo session. The ESM bounced off that double bottom low and rallied back above the opening range to a new high at 2356.50 soon after the Euro open. Since then, the S&P’s have fallen back to the open, and as of 5:08 am cst the last print is 2351.50, up two ticks on the day, with volume of 129k.
In Asia, 6 out of 11 markets closed higher (Nikkei -1.07%), and in Europe 8 out of 11 markets are trading higher morning (DAX +0.42%). Today’s economic calendar includes the Bank Reserve Settlement, MBA Mortgage Applications, Import and Export Prices, Atlanta Fed Business Inflation Expectations, Robert Kaplan Speaks, EIA Petroleum Status Report, a 30-Yr Bond Auction, and Treasury Budget.
Our View
I said a few week ago that the ES was going to fall into a 2330 – 2380 trading range, and that’s inline with what we have seen. I am not sure that the sell off yesterday completely takes care of the ‘unfinished business’ on the downside, but it did get the sellers all revved up. Also, I do not think all the sellers have covered, and that will fall right inline with today’s bullish stats and thin to win today and Thursday, as the shorts are vulnerable to their buy stops being targeted.
Our view is, you can sell the early rallies and buy weakness, or just keep it simple and buy weakness.
PitBull: CLK osc 28/9 turns down on a close below 5317, ESM osc -4/-6 turns up on a close below 235141, Vix osc 21/4 turns down on a close below 1323.
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 -0.46% , Hang Seng +0.93% , Nikkei -1.07%
- In Europe 8 out of 11 markets are trading higher: CAC +0.42%, DAX +0.42%, FTSE +0.41% at 6:00am ET
- Fair Value: S&P -3.51, NASDAQ -0.43, Dow -66.01
- Total Volume: 1.85 mil ESM and 4.2 k SPM traded
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