This week has started as the slowest trade of the year and we anticipate more of the same. So, while the market remain quiet, we will keep these Opening Prints short and sweet.
After trading the slowest day of the year on Monday, the S&P 500 futures held a tight 4.5 handle range in Globex Tuesday, on only 125K volume. When the cash session opened the ESU6 found an early 2176.00 low before pushing higher throughout the morning, up to 2183.50, just above Monday’s Globex high. Again, buyers dried up above the 2180 price, and like Monday, price retraced back to the 2173.75, 9.75 handles from the cash high. The futures rallied into the close on a MOC $40 million to sell before settling at 2177.50, up 2.0 handles, on total volume of 1.17 million Sep mini’s.
Overall, it was more of the same for an index that is very slowly building higher highs and highers lows, and turning what was a price ceiling for a couple weeks above 2170 into a floor that is leading to higher prices.
Over the last few years whenever equity indexes have been making new all time highs we have seen more and more bears come out calling tops. Last week Goldman Sachs released a note to clients suggesting that it was time to sit on the sidelines with equities, and then yesterday on CNBC, Marc Faber called for a 50% correction of the S&P 500. Seems like every new high brings them out. Eventually these bears go into hibernation and refuse to talk about their past calls.
When the S&P bounced back from the 666 low in March 2009 and traded to the 1,000 level they were calling for a pullback. Then at 1,500 even more of them were calling for a pullback. Then at 1750, 2000 and 2100 they were still calling for a pullback. Last year when the S&P 500 corrected in August from a 2135 high down to 1830, and then to 1802 this year, many of them were touting their permanent bearishness for nearly 1,000 points and felt validated because of a 300 handle pullback. Their calls were years late and they were still in the hole.
Well, guess what, now the benchmark index is doing what few thought it could. When they said that it was bearish this market couldn’t make a new high for 12 months. When they said Brexit was the end of the bull market, the S&P showed the same resilience it has since March 2009 and ran the stops higher, now we are in grasp of the 2200 level.
I have seen bears trying to short new highs for the last three years, but it seems that there are more of them with this rally, and they are taking it personally. All the while the S&P keeps running those stops, and even though they have been short all year, when the S&P does hit resistance somewhere above 2200, they will be telling me how right they were.
Overnight global equity markets had a touch of weakness. The ESU6 made an early Asian session low at 2174.50, matching Tuesday’s globex low, and then rallied up to 2181.50 early in the European session. The futures currently sit at 2180.00, up 2.5 handles on the day. The floor at 2155 and the ceiling at 2170 have moved higher now. The futures are doing a good job maintaining a new floor at 2173-75 and the ceiling looks like 2181-83 so far.
This is a steady, climbing market, grinding higher. How many times can it fail 2180? Well, we asked the same thing about 2170. It didn’t matter how much buyers dried up at those resistance levels because sellers never took charge either. Until sellers can definitively take over the ship and push through the support zones, it’s clear that it’s a dip buyers market, and we are not here to fight this trend.
In Asia, 6 out of 11 markets closed lower (Nikkei -0.18%), and in Europe 10 out of 12 markets are trading lower this morning (DAX -0.48%). Today’s economic calendar includes MBA Mortgage Applications, JOLTS, EIA Petroleum Status Report, a 10-Yr Note Auction, and Treasury Budget.
Our view: We expect more of the same out of the S&P until we see different. This mornings volume was low, hitting 100K at 5:45 am cst, and the calendar is light. It appears ok to fade the 2183 area again, but one of these times it’s going to push some buy stops. Our call is to buy the early weakness and sell mid/late day strength while keeping an eye on 2175 as support.
As always, please use protective buy and sell stops when trading futures and options.
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- In Asia 6 out of 11 markets closed lower: Shanghai Comp -0.23%, Hang Seng +012%, Nikkei -0.18%
- In Europe 10 out of 12 markets are trading lower: CAC -0.31%, DAX -0.48%, FTSE -0.23% at 6:30am ET
- Fair Value: S&P -3.74, NASDAQ -3.40, Dow -48.90
- Total Volume: 1.2m ESU and 2.0k SPU traded
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