After the S&P 500 (ESH17:CME) made an early high at 2364.75, just after 9:30 am cst, the futures sold off down 2355.75, back and filled above the vwap, and then started to move back up as ‘the guys with the better seats’ started showing up just before 1:30 ct.
The overall price action has been set in stone. If anything has become apparent, it is that the sellers continue trying to pick a high that never seems to come. Part of all of that has to do with a ‘no place to go but stocks’ mentality, backed by ultra low interest rates, big improvements in some of the economic data along with Trumps tax and infrastructure programs.
Another part of the ‘no place but stocks’ mentality is that certain commodity markets like gold and crude oil have seemed to lose their sex appeal in recent years. Crude fell from about $110 a barrel to $35 in very short order, and gold futures, which shot up to $1,950 a few years ago, threatened to go down to $1,000 and still can’t get back up. All of this combined with uncertainty in Europe and Asia, and a U.S. Treasury market that continues to be a laggard, keeps the U.S. stock market as the best place to go.
Before Trump was elected, an analyst from Barclays suggested there would be a 15% sell off on a Trump win, and this view was roughly echoed by many financial counterparts. Well, what we got was a complete miss, instead of the 15% drop we have seen an 11% rally. and it looks like for now like there is no stopping this market. S&P 500 2400 is in the cards, and perhaps even 2500 eventually.
Yesterday, the S&P’s did rally off that midday in the final hour going into the close to find a new high at 2365.00, on an MOC of over $1 billion to buy. However, the market made a new high by a tick and then started to roll over, historically not a good sign for bulls. In this current trading world, the old adages and technical rules no longer work, especially from the bearish side. This is why MrTopStep has been often repeating what is becoming one of our flagship phrases: “These are not your father’s markets, nor are they his charts.”
While You Were Sleeping
Asian markets followed Wall Street’s lead with most markets closing modestly higher overnight, however, Europe opened up with most of the markets tracking lower, with the exception of the big 3 (DAX, CAC, FTSE), each trading very modestly higher.
The S&P futures overnight opened globex at 2360.00 and made an early low of 2359.50 before pushing higher during the European open. From there the ES lost some steam and reversed down to a new session low at 2356.25, a 7.5 handle drop from the highs. Since then, at 5:30 am cst, the S&P 500 futures have last printed 2357.25, down 2.75 handles, on volume of 86k.
In Asia, 9 out of 11 markets closed higher (Shanghai +0.24%), and in Europe 8 out of 11 markets are trading lower this morning (DAX +0.25%). Today’s economic calendar includes MBA Mortgage Applications, Redbook, Existing Home Sales, a 2-Yr FRN Note Auction, Jerome Powell Speaks, a 5-Yr Note Auction, and the FOMC Minutes.
Our View
The ESH17 started selling off around 2:00 am ct, and traded down to 2354.25 around 6:30 am. In most cases this is standard protocol, sell off a little before the 8:30 ct open and then rally. I am trying to stay short with the idea a pull back is coming, but we have yet to see any significant pull back. What we continue to see is the MrTopStep 10 handle rule, which has been a good guide for the daily pull backs. Our view; the buy stops are getting smaller and the sell stops are starting to get larger. At some point the dam will break, it’s just a matter of when. We lean to selling the early rallies and buying weakness, with the idea that we are close to some type of high.
Market Vitals for Wednesday 02-22-2017
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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 +0.24%, Hang Seng +0.99%, Nikkei -0.01%
- In Europe 8 out of 11 markets are trading lower: CAC +0.13%, DAX +0.25%, FTSE +0.10% at 6:00am ET
- Fair Value: S&P -1.90 NASDAQ +1.41, Dow -25.12
- Total Volume: 1.65m ESH and 6.7k SPH traded
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