2016 Amazing First Half
We are already staring into the second half of this year. The beginning of the year saw a 10% decline in the S&P 500 futures in January followed by a lower retest in February. After making the Feb 11th low, the futures ran up nearly non stop into the Brexit vote on June 23rd where the benchmark index saw massive single day selling, but has since risen nearly 10% and is making new all time highs. Even when we scale back further, it was August last year when the U.S. equity indexes saw their first correction since 2011. That correction was followed by the best single month rise for the S&P 500 ever in October, and the Fed raising interest rates in December for the first time since 2006.
In all my years having been in the futures industry, these last 12 months can rival any that I can remember in terms of unique qualities. Here we are, when the S&P couldn’t make a new high for over a year, and everyone seemed to give up on the idea, it kept plugging along. These markets have whipped me back and forth as much as the next guy. I have said often over the last few months that the sentiment indicators, as well as COT reports, still showed strong short interest in the index futures, and as long as the bus was crowded long term, if would be difficult for this market to make new waves lower. Now the index is staring in the face of 2200 and 2250, and the question is, how much longer can short sentiment hold out?
What Does Next 6 Months Hold?
As much as I like talking about yesterday, I also try to think about tomorrow. MrTopStep is beginning to look ahead to the remainder of the year. Typically we should be in the slowest time of the year, but not so in 2016, as the summer has marked some of the most engaging price action that I can remember.
Next week begins the Republican National Convention, then the following week the Democrats have their turn. Central Bankers are still very much in focus as it seems that we have to live through every Fed speaker from now into eternity. The Bank of Japan, Bank of England, as well as the European Central Bank, are expected to do anything but stand still going forward. In just a few weeks we will be near the Labor Day weekend, and according to the historical calendar, volatility will begin to pick around that time and last into October when then the seasonals begin to take shape for a rally. But of course, this year there will be a Presidential election, and the polls are starting to pick up. It is going to be an interesting path to get there.
If we think all that is going to be amazing, just imagine when these candidates begin to debate in September & October, it is going to be a mess. One more thing, the perennial disappointing Chicago Cubs are favorites to win the World Series, and are currently the best team in baseball. The second half of this year promises to be exciting.
When Will The Music Stop?
As a child I played musical chairs from time to time when the adults were trying to entertain our free time in the school. The fear was that we would lose our focus in all the music and noise, and then when it stopped, forget that we need a chair to fall back on. Currently for traders the music is playing loud, and we will enjoy it, but at some point the music will stop and I am not sure when that will be. The PitBull has often likened the financial markets to “water in the bathtub” that will slosh from one end of the tub back and forth to the other end and will always be contained by the tub. That is pretty much how life is, back and forth, side to side. It seems unstable but there is always some order that abounds. As traders, we have to be prepared to change sides in an instant and “NEVER fall in love with positions.” Until then it’s round-n-round it goes where it stops nobody knows.
In Asia, 9 out of 11 markets closed higher (Nikkei +0.68%), and In Europe 9 out of 12 markets are trading lower this morning (DAX -0.80%). Today’s economic calendar includes a 3-Yr Note Settlement, a 10 Yr Note Settlement, a 30-Yr Bond Settlement, Consumer Price Index, Retail Sales, Empire State Mfg Survey, Industrial Production, Business Inventories, Consumer Sentiment, Baker-Hughes Rig Count, John Williams Speaks, and Neel Kashkari Speaks.
July Opex Day
Our View: Opex day is here and the stats show a 16/16 split over the last 32 years. Furthermore, this week the cash session has not traded very well, and after globex traded flat I think that there could be some profit taking today along with the mid month rebalancing. What I don’t want to do is fight the intraday tape. I think it is worth trying to short an early rally or buy and early dip, but if that fails, I don’t think we can spend all day looking for a reversal if the market is trending. At the same time, given the quiet overnight and recent ranges, it’s likely that today will maintain a 10-15 handle range where the edges are worth fading.
Download all of the July expiration stats here.
Dave Wienke’s Macro Technical Views
TRADING CONCLUSIONS:
USDJPY went long above 103.58* pvt pt, nearly hit the target area of 106.46/106.59 (200week mvg avg) and looking to get short. Crude Oil is somewhat positive very short term as it holds above key 200dma and .382** support. Looking to play the chop for now. Looking for 2172 in SPX today.
HIGHLIGHTS:
8:30ET CPI, Retail Sales, Empire State Mfg Survey; 9:15ET Industrial Production; 10:00ET Business Inventories, UofM Consumer Sentiment; 1:00ET John Williams speaks; 1:15ET Bullard/Kashkari speaks
China GDP tops estimates;
EQUITIES: SPX trying for a fifth straight all-time high
ESU has initial resistance to start the day at 2159.75, then 2164.50. Positive short term above 2150.75* looking for 2175 area. SPX weekly chart showing the break-out above the trend line . SPX has 2163 as initial key early
The major index basket came within ticks of touching its June|July ’15 highs. QQQ positive with settles above the 111.28 area. NQU has its closing key at 4551*. IWM has 121.51* as .786 retrace and key resistance
NQU/ESU holding below its pivotal trend line
Financials ETFs hitting some key resistance areas yesterday and will be a potential key for further upside potential in the major indices.
The Eurostoxx 50 has its 200dma above as very pivotal resistance
ASSET ALLOCATION MODELS:
USU/ESU is breaking its first key Fibonacci support and should see further decline here. TY/SP is breaking its lower trend line support is negative for fixed income relative to equities as well.
WTI relative to ES is holding above the major support (.382* and 200dma*)
Gold/ES is negative and testing short term .618. Looking for a test of the short term .786* and 200dma here. Lagging momentum indicator is at inflection pt
Silver vs WTI is taking a pause at the Feb high in the pair
FIXED INCOME:
TYU is dipping below the short term moving average that has been a decent pivotal area. First support at 132-08, then 132-02*, 131-22, 131-03*, 130-20** 10 year yield has 1.578% as initial resistance
The 10/30 Yield Curve is strengthening off its .786* retracement support and has .765 area as initial resistance and target. 5/30 curve has same look on the longer term chart and has 1.225% as target on unwind from oversold
2/10 Yield Curve has this trend line as potentially pivotal pt
ENERGY:
August WTI continues to hover and hold the 200dma and has 46.02 as first resist and then 46.42*
Sept Brent has 47.62 as initial key resistance area then 48.04, 49.85*
August RBOB is firming after nearly touching the .618* support and has plenty of room before first real key resistance at the .382 retrace**(sell)
METALS:
August Gold is lower and neutral short term. Key supports at 1312/15*, 1305*, 1300.4, 1292 | Resistance at 1342.2, 1349.0, 1355.7, 1365.3
Sept Copper: higher again and has first resistance at 2.2665 (s/t .786), 2.3370*, then the long term trend line at 2.4350**. First support 2.2160, 2.1970, 201780, 2.1510*
CURRENCIES: (7:18ET snapshot)
US$ INDEX: holding below the 200dma | key levels at 95.680*| Resistance at 96.600*
EURUSD: has 1.1183 as initial key resistance, then 1.1224
USDCAD: is back below its short term pivotal moving average and the settle below turns momentum negative again. Supports at 1.2841*, 1.2760 (.786)
USDJPY: turned short term positive above 103.58 and we were looking for upside momentum above to test the 200 week moving average (106.46/59*). 105.13 is intraday pivotal area then 104.85, 104.45, 103.90*
Pound future has the 1.3492 level as key resistance now
As always, please use protective buy and sell stops when trading futures and options.
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- In Asia 9 out of 11 markets closed higher: Shanghai Comp +0.01%, Hang Seng +0.46%, Nikkei +0.68%
- In Europe 9 out of 12 markets are trading lower: CAC -0.91%, DAX -0.80%, FTSE -0.32% at 6:30am ET
- Fair Value: S&P -6.41, NASDAQ -6.79, Dow -87.43
- Total Volume: 1.78m ESU and 5.0k SPU traded
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- In Asia 9 out of 11 markets closed higher: Shanghai Comp +0.01%, Hang Seng +0.46%, Nikkei +0.68%
- In Europe 9 out of 12 markets are trading lower: CAC -0.91%, DAX -0.80%, FTSE -0.32% at 6:30am ET
- Fair Value: S&P -6.41, NASDAQ -6.79, Dow -87.43
- Total Volume: 1.78m ESU and 5.0k SPU traded
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