Yesterday was another session of curious price action. These sessions have been typical this month as the stock markets are supposed to dip and look afraid. But, what we are seeing is some of the most quiet and orderly trade, especially for the seasonalities. We have repeated the phrase this week, “looks weak, buyem.” This played out perfectly yesterday as the S&P 500 futures opened the regular session with some weakness after the statement and press conference of Mario Draghi of the ECB.
When the cash session opened at 2134.75 the S&P was 9.75 handles off the overnight high. The session looked weak early, running some sell stops down to 2131, before changing gears and running buy stops up to 2141.25. From there the S&P took a dive down to 2126.75, a 14.50 handle move, in about 30 minutes. After that, the index futures looked too weak to buy, but the trend has been to find the morning bottom. The S&P then turned higher, trading back up to 2140.25, and made a lower high before trading sideways to lower into the cash close. The ES settled at 2137.00, down just 1.50 handles, or -.08%.
Overnight global equity markets have been quiet. Equities are trading sideways to lower without any real action as markets are closing for the week. The ESZ made a 2138.50 early high in globex, but since then has been offered down to 2128.75, on volume of 102K at 6:15 am cst.
Today is the October expiration day which the stats show being up 19 of the last 32 years. As orderly as this week has been, we are not expecting there to be an exciting trade today. We are looking at the 2126.00 price area, and 2118 below that, as targets and support. To the upside, we think there could be buy stops above 2138 up to 2145, and then to 2150, if price can get there.
From Barclays:
Board Governor Tarullo (FOMC voter) speaks: Tarullo speaks on Pedagogy and Scholarship at Columbia Law School. We expect no monetary policy content.
San Francisco Fed President Williams (FOMC non-voter) speaks: We expect a repeat of his 10/19 comments.
In Asia, 7 out of 10 open markets closed lower (Nikkei -0.30%), and in Europe 6 out of 11 markets are trading lower this morning (DAX -0.08%). Today’s economic reports includes Daniel Tarullo Speaking, the Baker-Hughes Rig Count, and John Williams Speaks.
Our View: As of 6:30 am, the ESZ16 sold off and ‘double bottomed’ at 2128.75, and is trading 2130.50 as I write this. The trade is a bad ping pong match. It can’t seem to sell off too hard, or rally hard either. There are no economic reports today, but there are some earnings. I have to be honest, I am still getting that ‘funny feeling’ I have had recently that there is something amiss with the S&P. I do not know if its the election, the possible rate hike in December, or a combination of both, but this seems a little off kilter.
That said, today is the Friday of the December options expiration. In most cases the ES is busy for the first and last hour. Our view, with the ES down this morning, we think it’s possible the futures rally initially and then sell off a bit. I want to get a look at the price action in first 15 or 20 minutes of trade, but I have that old sinking feeling. Have a good weekend everyone and always remember, if you are trading futures or options… USE PROTECTIVE STOPS.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 10 open markets closed lower: Shanghai Comp +0.21%, Hang Seng closed, Nikkei -0.30%
- In Europe 6 out of 11 markets are trading lower: CAC -0.11%, DAX +0.09%, FTSE +0.32% at 6:00am ET
- Fair Value: S&P -5.86, NASDAQ -7.07, Dow -82.24
- Total Volume: 1.6m ESZ and 2.3k SPZ traded
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