The ‘Short’ Plight
These shortened weeks can seem long, but they seem especially ‘long’ for the short sellers. So far this week the S&P 500 futures (ESZ16:CME), the Dow Jones futures (YMZ16:CME), and the Nasdaq 100 Futures (NQZ16:CME) are all up over 1%. We understand that a lot of traders do not pay attention to historical stats or seasonalities. Clearly, the beginning of the ‘best 6 months for stocks,’ and the Thanksgiving holiday week, are a good road map to what can happen going into the end of the year, especially when volume drops around the holiday’s.
Wednesday, the ESZ opened at 2194.50, down 5.25 handles, and 9 handles off the globex high. The futures quickly travelled down to 2192.00, just a single tick above Tuesday’s high. From there the ‘thin-to-win’ trade took over as the S&P futures traded up to 2102.25, a 10.25 handle bounce, before settling at 2200.50.
During yesterday’s globex session the S&P’s reached a new all time high, trading up to 2207.00 at 10:45 am cst, and then retested that level early in the Asian session overnight. The ES topped out at 2207.50 then traded lower during the rest of the session, making a low of 2202.50, and has last traded at 2204.00, up 3.25 handles.
Thin-To-Win Takes Over
We knew there would be a ‘thin-to-win’ type environment, and what we have seen is and ideal dip buying trade. The S&P 500 futures travelled up to 2200 for the first time this week, breaking the 2191.50 all time high. The bulls did what was needed by building a floor of support at that old high, and now seems to be making the next move by building a floor at the 2200 level. T+3 and the month ending trade are coming up, and volatility will likely stay flat until closer to December’s Fed meeting.
At every new high, short sellers come in and try to push the ES down, and they ultimately they become fuel for buy stops. MrTopStep thinks that shorting opportunities are going to be hard to find over the next several sessions, and we lean toward buying the small dips and holding as long as possible while letting it rip.
While You Were Asleep
In Asia, 11 out of 11 markets closed higher (Shanghai +0.62%), and in Europe 9 out of 11 markets are trading lower this morning (DAX -0.12%). Today’s economic calendar includes the Weekly Bill Settlement, a 2-Yr FRN Note Settlement, International Trade in Goods, PMI Services Flash, Baker-Hughes Rig Count, NYSE Early Close: 1:00 PM, Fed Balance Sheet, and Money Supply.
Our View: Since last night’s 5:00 pm globex re-open, the mini’s have traded less than 70k contracts, as of 7:20 am. This half day of trade probably won’t see more than 750k traded, if that even. It’s likely going to be algo chop heaven in a tight sub five handle range for much of the session as many traders won’t be returning to desks for the shortened day. However, there is a light economic calendar, and the ESZ is just a couple handles off the all time high. Either way, we think it will be making a new high print in the regular session today, and want to be buyers on the open or after early weakness.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 11 out of 11 markets closed higher: Shanghai Comp +0.62%, Hang Seng +0.51%, Nikkei +0.26
- In Europe 9 out of 11 markets are trading lower: CAC -0.18%, DAX -0.13%, FTSE -0.05% at 6:00am ET
- Fair Value: S&P -2.32, NASDAQ -1.31, Dow -32.56
- Total Volume: 1.1m ESZ and 2.7k SPZ traded
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