With the Dow Jones futures (YMZ16:CBT), S&P 500 futures (ESZ16:CME), Nasdaq Futures (NQZ16:CME) and Russell 2000 futures (TFZ16:ICE) all trading at new all time highs, many traders we talk to are asking ‘what the next bump is the road’ will be. Will it be Thursday’s ECB meeting and the threat of less quantitative easing, or will the December options expiration get things moving? To tell the truth, I do not think either will create much volatility, but next Wednesday’s rate hike will. When it comes to trading the index futures markets it doesn’t matter if you are a short term day trader, or you are holding for days, you have to have a forward. You have to stay on top of all the news, big or small.
Yesterday’s trade was exactly as the title reads… Bump and grind. After a quiet overnight Globex session the S&P futures opened at 2206.25, up two handles from Monday’s close, and immediately saw weakness. Sell programs took the ES down to an early low of 2200.75 before trading higher through the morning into the early afternoon, grinding up to 2208.75, just a tick from the overnight high. Then, late in the session, the MrTopStep Imbalance Meter (MiM) showed the early imbalances to the sell side. The MiM showed as much as $300 million to sell, and the futures rallied into the close, making a new high at 2212.00. The futures settled at 2210.25, up six handles on the session, with volume just under 1.5 million.
$4.3 Billion Sold Over 6 Sessions
| Monday Nov 28 | MOC $1.3 Billion to Sell |
| Tuesday Nov 29 | MOC $790 million to Sell |
| Wednesday Nov 30 | MOC $1.9 Billion to Sell |
| Thursday Dec 1 | MOC $475 million to Sell |
| Friday Dec 2 | MOC $25 million to Buy |
| Monday Dec 5 | MOC $1 Billion to Sell |
| Tuesday Dec 6 | MOC $75 million to Buy |
Over the last 7 trading days, 5 ‘MOCs’ have shown net sell imbalances totaling $5.465 billion. Of the 2 days that ‘buy imbalances’ did show up, there was only $100 million bought. That is $4.365 billion in stock sold on the final 3 trading days of November, and 2 out of the first 3 trading days in December. We have always said that if you wanted to know where the S&P was going all you had to do was follow the money, but in this case, the markets are so firm it doesn’t seem to matter.
While You Were Asleep
Overnight, the global stock market rally continued as markets bid higher in Asia, and then in Europe. The S&P 500 futures made a low of 2208.50 early in the Asian session and then traded up to a high of 2213.00 early in the Euro session. The ES is currently selling off a little, and has last traded at 2208.00, down 2 handles on the session, with volume at 120k as of 7:20 am cst.
It’s been another quiet night, with low volume and a narrow range, and the calendar is light again. Yesterday, we identified the same set up and said it leads to thin-to-win type trade, and we see more of the same today. Bulls have done their job, once again defending 2200 and pushing above 2210, and now defending that level. Bears don’t have much to fight for, except for recapturing 2210. If they can’t, it’s going to be a long painful grind higher.
In Asia, 8 out of 11 markets closed higher (Nikkei +0.75%), and in Europe 11 out of 11 markets are trading higher this morning (DAX +1.49%). Today’s economic calendar includes the Bank Reserve Settlement, MBA Mortgage Applications, Gallup U.S. Job Creation Index, JOLTS, EIA Petroleum Status Report, Consumer Credit, and Treasury STRIPS.
Our View
We are sticking with the theme that the ES will rally early in the week and early in the day, but pull back mid-to late week. That falls right into looking for the PitBull’s ‘Thursday / Friday low the week before the expiration.’ According to the S&P cash study for the December 2016 options expiration, the S&P cash (^GSPC:SNP) has been up 18 / down 14 of the last 32 occasions.
Download all of the December expiration stats here
Overall, the week’s stats are friendly, but we do not think a big rally or sell off is nearing. The VIX traded down to 11.54. There is no fear. Our view is the same as yesterday, but with a small twist. Sell the early rallies and buy weakness, keeping in mind there has to be a down day or two in here somewhere.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed : Shanghai Comp +0.71%, Hang Seng +0.55%, Nikkei +0.74%
- In Europe 11 out of 11 markets are trading : CAC +0.86%, DAX +1.49%, FTSE +1.42% at 6:00am ET
- Fair Value: S&P -0.69, NASDAQ -0.20, Dow -5.20
- Total Volume: 1.48m ESZ and 6.5k SPZ traded
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