Monday nights globex session was another non-event. The ES was held to just a 6 handle range, and only 127k contracts traded before the cash open. The S&P 500 futures (ESU17:CME) opened the regular trading session at 2423.25, down -1.25 handles, and the Nasdaq 100 futures (NQU17:CME) opened up at 5688.00, down -6 points. Both futures contracts tested their globex lows in the first few minutes of trade before turning higher, and by 9:40am CT, early highs were printed at 2426.00 in the ES, and 5717.75 in the NQ.
Just after 10:00am, a powerful selloff pulled the ES back more than 15 handles, all the way down to 2410.25. Was this an algo flush before a trip back up to 2435? Or was just it a knee jerk reaction to the release of Donald Trump Jr’s emails to a Russian lawyer concerning dirt on Hillary Clinton? I don’t know, but either way, it provided the movement a lot of traders were waiting for.
The lows in the ES and the NQ were in by 10:30am, and from there, both markets began a march back up. The recovery back to positive territory lasted the remainder of the session, but stocks closed out near the highs. In the end, the S&P 500 futures (ESU17:CME) settled at 2424.50, unchanged on the day, the Dow Jones futures (YMU17:CBT) settled at 21367, up +8 points, or 0.04%, and the Nasdaq 100 futures (NQU17:CME) settled at 5720.00, up +26.00 points, or +0.45%.
S&P 500 Seasonality and the Dog Days of Summer
Arthur Hill from StockCharts.com recently wrote an interesting article on the seasonal tendencies of the S&P 500 over the last 20 years…
The chart below shows the seasonal tendency for the S&P 500 over the last twenty years (1998 to 2017). The number at the top of each bar shows the percentage of months the S&P 500 advanced for that particular month, while the number at the bottom shows the average gain/loss (percentage) for that month. For example, the S&P 500 rose 55% of the time in June and the average gain is actually a loss (-.5%).
These numbers further reveal that the next three-month stretch was the weakest three-month stretch over the last 20 years. First, the S&P 500 advanced less than 50% of the time in July and September (47% each). These are the only two months below 50%. The S&P 500 advanced just 53% of the time in August, which is the fourth lowest reading. Taken together, the average of the last three months is 49% ((47+53+47)/3=49) and this is the lowest of any three-month stretch.
The average gain/loss at the bottom of the chart reinforces the negative bias for the next three months. The average loss for the S&P 500 is -1.1% in August and -.90% in September. These are the two biggest negative numbers on the histogram. Further more, the sum of the last three months is the lowest of any three month period (+0.3% + -1.1% + -0.9% = -1.7%). History does not always repeat itself, but the historical tendency is clearly negative over the next three months. Might be a good time to go fishing!
Read the full article, and more from Arthur Hill at StockCharts.com
While You Were Sleeping
Overnight, equity markets in Asia traded mostly lower, led by the ASX 200, which fell -0.96%. Meanwhile, in Europe, all markets are currently trading higher this morning, with the FTSE MIB up +1.12%.
In the U.S., the S&P 500 futures opened the globex session at 2425.00, and traded in a 4 handle range from 2426.50 to 2422.50 for most of the night. At 4:45am CT, the ES finally broke out of its range, and by 5:30am had printed a new high at 2429.25, extending the overnight range to 6.75 handles.
Once again, volume remained low overnight, as traders await Janet Yellens’ testimony this morning. As of 6:45am CT, the last print is in the ES is 2428.00, up +3.5 handles, with 93k contracts traded.
In Asia, 7 out of 11 markets closed lower (Shanghai -0.16%), and in Europe 12 out of 12 markets are trading higher this morning (FTSE +0.83%). Today’s economic calendar includes MBA Mortgage Applications, Janet Yellen Speaks, Atlanta Fed Business Inflation Expectations, Janet Yellen Testifies, EIA Petroleum Status Report, a 10-Yr Note Auction, Beige Book, and Esther George Speaks.
Our View
Our call yesterday was to buy the pullback midday, and since the S&P has not had back to back down days in three weeks, we wanted to hold the long position going into today. As of 7:00 am CT, the S&P has now bounced 19 handles to 2429.25, which is back above the halfway mark of the range for the last month.
At this point, it’s all been the water in the bathtub effect, splishing to one side of the tub before splashing back to the other side. The two sided trading has been beneficial, while bias and conviction based trading hasn’t come as easy.
We see buy stops building between 2430-2432 that can push the S&P up, first to 2436, then to 2440, with some possible strength in the last two days of the week to push to new all time highs. However, if they are unable to run those stops today, then we see a pullback to 2420.
PitBull: CLQ osc -10/-2 turns up on a close above 4447; ESU osc 1/-3 turns down on a close below 242047; VIX osc -2/3 turns up on a close above 1148.
Market Vitals for Wednesday 07-12-2017
[gview file=”https://mrtopstep.com/wp-content/uploads/2017/07/Market-Vitals-17.07.12.pdf”]
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets closed lower: Shanghai Comp -0.16%, Hang Seng +0.64%, Nikkei -0.48%
- In Europe 12 out of 12 markets are trading higher: CAC +0.89%, DAX +0.66%, FTSE +0.83%
- Fair Value: S&P -2.44, NASDAQ +2.28, Dow -54.80
- Total Volume: 1.3mil ESU, and 770 SPU traded
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