Yesterday’s price action wasn’t very noteworthy especially considering it’s only two days before the Brexit vote. I warned yesterday that the markets, which were risk off last week, have mostly retraced since then and now seem to no longer be much concerned. For what seems like the first time, the S&P was pretty muted after a Brexit poll was released yesterday. Volume was the lowest in days in the mini and in the pit, and during the regular trading hours the ESU16 maintained a 11.75 handle range, hardly anything significant, and closed up 5.75 handles. Other futures markets such as gold and Treasury bonds also traded quiet.

On top of the concerns of the Brexit vote, yesterday Janet Yellen was testifying before the Senate Banking Committee. Chair Yellen’s tone seemed remarkably mixed. At one point she mentioned the “loss of momentum” in the labor market. She went on to comment on the “uncertainties” surrounding the U.S economy, however she also said that it was very unlikely the United States would enter recession this year, and that the Brexit impact here in the U.S. would be limited. Despite her dovish tone, and a muted stance on interest rates, the equity markets didn’t appear to be interested. We often hear of “bad news is good news,” or “good news is bad news,” but perhaps it’s finally time that NO news is NO news!

Will the quiet markets prove to be correct and this week’s low volatility into Brexit suggest a quiet response? I don’t know. What I do know is that these quiet markets make me uncomfortable. Maybe Brexit will be a non event at this point, but that seems highly doubtful. What I don’t want is a quiet market Monday through Thursday and then wake up Friday morning to a considerable gap down. Overnight, equity markets were again trading with a risk off temperament, but the S&P appeared out of fuel for the moment, trading inside of yesterday’s RTH range.

In Asia, 6 out of 11 markets closed higher (Nikkei -0.64%), and In Europe 10 out of 12 markets are trading higher this morning (DAX +0.54%). Today’s economic calendar includes Bank Reserve Settlement, MBA Mortgage Applications, FHFA House Price Index, Stanley Fischer Speaks, Existing Home Sales, Janet Yellen Speaks, EIA Petroleum Status Report, 2-Yr FRN Note Auction, and a 7-Yr Note Auction.

Our View: With volume just under 120K at 6:30 am it looks like it’s going to be a slow day. The calendar is light outside of existing home sales which isn’t expected to be a market mover. Trading is difficult because we think there should be some volatility and then the range tightens. Trading an expansion of the intraday range becomes tough and leads to false breakouts. Based on volume, yesterday’s range, and the globex range, it will likely be the kind of day to fade the first hour move, then fade the midday move.

‘Welcome to Turn Around Tuesday’

As always, please use protective buy and sell stops when trading futures and options.

• In Asia 6 out of 11 markets closed higher: Shanghai Comp +0.94%, Hang Seng +0.61%, Nikkei -0.64%
• In Europe 10 out of 12 markets are trading higher: CAC +0.31%, DAX +0.54%, FTSE +0.33% at 6:30am ET
• Fair Value: S&P -8.54, NASDAQ -8.50, Dow -100.14
• Total Volume: 1.4m ESU and 2.4k SPU traded

[s_static_display]