There has to be an ‘end game’, there always is. Remember the old saying that what goes up must come down? Well that’s not happening. Yesterday the (ESH17:CME) sold off down to 2319.75, double bottomed, and then continued to charge higher. Right now the ES, NQ and YM are ‘wrecking balls’, and anyone that tries to jump in front of them gets run over. I know I have written a lot about a sell off in the first quarter, but I have to admit, until the overall price action ‘flips’ the ES will continue higher.
What used to scare the equity markets no longer does. The prospect of interest rate hikes were a risk off event, and the S&P’s sold off the first 60 days after the December 2015 rate hike, but now the market no longer has any jitters. It used to be that when the Fed Chair would speak, the markets would sell off a bit and then rebound, but the Greenspan/Bernanke/Yellen trade no longer pays. It used to be that economic indicators such as GDP, NFP, and other high level reports, would push the S&P into some modest (at least) volatility and would be the highlight of the week, now the S&P seems to ignore all this. And lastly, it used to be that seasonalities mattered, particularly bearish seasonalities, and last year after Labor Day traders were frustrated because the seasonal sell off didn’t even come close to occurring, neither did some bearish stats for January or February.
Let’s face it, I often say “these are not your father’s markers, nor are they his charts,” and this statement could not be more true. It used to be that the S&P would at least give some pullbacks along the way to let the “buy the dip” traders come in and bid it up, but now if you’re not buying 4-5 handle pullbacks, your being left in the dust waiting for 10 handle retracements.
Yesterday was another case of the all time highs. If you bought the open, set a wide enough stop, closed your eyes and held on, you would eventually be rewarded. After opening the cash session at 2323.75, down 2.75, the futures struggled early on, making a low of 2319.75, which would be the double bottom. Rather than leading to a modest 10 handle bounce, the S&P’s kept going, rallying well after Yellen finished her testimony, printing 2337.75 in the early afternoon, before settling the day two ticks off that high.
While You Were Sleeping
Overnight equity markets in Asia and Europe were higher, as the Nikkei and Shanghai both closed higher by more than one percent. The S&P 500 futures opened globex at 2335.50, made a low at 2334.25, and spent a lot of time overnight trading just above that low. The high of the session came in at 2340.00 for a new contract high late in the Asian session, and as of 6:08 am cst, the S&P’s have last printed 2336.00, down a single handle on the session, with volume at 76k.
In Asia, 8 out of 10 open markets closed higher (Nikkei +1.03%), and in Europe 9 out of 11 markets are trading higher this morning (DAX +0.27%). Today’s economic calendar includes the Bank Reserve Settlement, a 3-Yr Note Settlement, a 10-Yr Note Settlement, a 30-Yr Bond Settlement, MBA Mortgage Applications, Consumer Price Index, Retail Sales, Empire State Mfg Survey, Industrial Production, Atlanta Fed Business Inflation Expectations, Business Inventories, Housing Market Index, Janet Yellen Speaks, EIA Petroleum Status Report, Eric Rosengren Speaks, Harker Speaks, Treasury International Capital, and William Dudley Speaks.
Barclays Calendar Preview
Our View
My view all week has been to sell the midday rally, or just go with the path of least resistance and buy early weakness. However, selling rallies is not working, and there are not reasonable enough dips to buy. Buying the open and walking away while holding to new highs has been the trade, and it’s a tough one. Almost everyone seems to think the S&P is too high, but it’s all relative. With the expiration stats getting weak today and tomorrow, and the mid month rebalance in the cards, we think the best chance for a pullback comes in the next two days. However, with the bullish tone of the market, any weakness will likely be bought going into Friday’s expiration.
Download all of the February expiration stats here
Market Vitals for Wednesday 02-15-2017
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As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 10 open markets closed higher: Shanghai Comp -0.15%, Hang Seng +1.23%, Nikkei +1.03%
- In Europe 9 out of 11 markets are trading higher: CAC +0.54%, DAX +0.27%, FTSE +0.47% at 6:00am ET
- Fair Value: S&P -2.19 NASDAQ +2.06, Dow -23.07
- Total Volume: 1.4m ESH and 4.9k SPH traded
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