In last week’s shortened trade we saw some mild weakness, but more of the same dip buying, as the 2040- 2050 area continued to show moderate resistance in the S&P 500 futures. In turn, this resistance was pivotal in pushing the ESM16 down to the 2012.25 price, after making a weekly high of 2047.50 earlier in the week. We saw the risk being to the downside and put out in the IMPRO Room and on social media our call for a move to 1980. However, when equities looked vulnerable, selling dried up and dip buyers continued to have their way pushing the S&P’s to pare much of its losses and trade back to 2026.75 on the weekly close, breaking a 5 week winning streak. The benchmark futures trade over the last few days appears to be a doji type action on the weekly chart as the equity markets enter into a pivotal close to Q1 and open to Q2 this week.
Overnight, Asian stocks dipped, as the European indexes are mostly closed for the holiday. In the U.S. the S&P 500 futures traded higher for much of the overnight session making a high of 2039.75 just before 3:00 am CT, up 11.25 handles, before dropping back to the 2033.25 area, up 4.75 handles and 6.5 handles off the highs. Following a three day weekend, and a European holiday today, combined with a lower volume trend in recent weeks, we expect for today’s trade to be relatively quiet on lower volume and a tight range. The 2040 area still seems to be giving the ESM trouble, and we expect for resistance between 2040-45 today. However, technically speaking, it’s likely the more that the S&P bumps against that area, the resistance will fade leading to higher prices.
Our call last week was the next 60 handles lower from the 2040 area and we are standing behind that at this point. For now, there seems to be too much heaviness around 2050 that limits the upside, and with the non-farm payroll release at the end of the week, the stats suggest that the March number is often a miss on the initial print, this could weigh on equities somewhat this week. For bears, Thursday’s 2012.25 needs to be targeted again in the next two days, which will likely lead to a move to the 2000 area and potentially to our 1980 call. There is support between 1995 – 2010. How price reacts at those levels will tell us if buyers continue to control the tape in April and continue bidding up every small dip.
T+3
Tomorrow is the T+3 for the end of the first quarter. Q1 rolling out, combined with NFP, there is potential for some action this week. The historical calendar shows the post Good Friday stats negative on Monday and moderately positive on Tuesday, however, March doesn’t typically close strong with the tendency in recent years for a modestly lower close. Given all the buying during the second half of Q1 it seems logical that the rebalance of portfolios could lead to selling into the quarter end.
In Asia, 8 out of 9 OPEN markets closed lower (Shanghai Comp -0.73%), and In Europe markets are CLOSED this morning. This week’s economic calendar features Friday’s unemployment report and 27 economic reports, 15 Treasury events and 8 Fed speakers. Today’s economic calendar includes International Trade in Goods, Personal Income and Outlays, Pending Home Sales Index, Dallas Fed Mfg Survey, 4-Week Bill Announcement, 3-Month Bill Auction, 6-Month Bill Auction, and a 2-Yr Note Auction.
Our View: We still have our lower view, but with tight ranges and lower volume, we know it’s going to be a grind. Meanwhile, as dip buyers still control this market, we have to be two sided and cannot afford to think only from a seller’s perspective. Our call is to sell the weakness at the 2040 – 2045 area. As of now that looks to be 10 handles from the low end of the globex range and will likely by 10 handles from the cash open. It’s more difficult to find an area to buy that we like but using the 10 handle rule from the 8:30 cash open could be a solid place. In this environment one has to take some profits when they are there because 10-20 handle moves are difficult to find and hold on to as an intraday trader.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 9 OPEN markets closed lower: Shanghai Comp -0.73%, Hang Seng (closed)%, Nikkei +0.77%
- In Europe – out of 12 markets are trading CLOSED:CAC %, DAX %, FTSE % at 5:30am CT
- Fair Value: S&P -9.28, NASDAQ -11.00, Dow -103.03
- Total Volume: 1.5mil ESM and 4.3 k SPM traded
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