So far this week in the S&P futures, “what goes up must come down” hasn’t happened. However, the week is far from over.
The E-mini S&P 500 Dec 13 contract (ESZ13.CME) continued its surge after yesterday’s jobs numbers came in lower than expected. One would think the S&P futures would take a nosedive, but they didn’t, they did the exact opposite. After the numbers release it wasn’t just the S&P that took off. So did gold, bonds and the euro. To put it plainly, there are no sellers.
After a push up to another all-time contract high at 1754.30, the ESZ13 started to weaken and at exactly 9:24 we put this out: (09:24:29): desk thinks we are at or near an early high.
S&P futures flipped from buy programs to sell
It was not on the exact high, but what we noticed was something we call a “premium flip.” That means the ESZ was doing buy programs and then lost premium (the difference between the cash and futures prices) and flipped into a sell program.
Exactly 32 minutes later the ESZ was making a new low at 1742.00, 11 handles lower from when we put out the IM. That, my friends, is when reading program levels pays off.[pullquote]The Asian markets closed sharply lower and 12 out of 12 markets in Europe are down this morning . Today’s economic and earnings calendar starts out with 4 economic numbers and earnings by from Boeing [BA] and Caterpillar [CAT].[/pullquote]
The S&P futures have now closed higher 8 of the last 9 sessions. The rally is what we call an S&P hullabaloo. Things could not look worse and then BAM! back come the buyers and the S&P never looks back.
If you took the word “sell” out of your trading vocabulary over the last week and a half, your P&L must be way in the black. While we have seen a lot of moves, the most recent one shows that as soon as things go bad and the word “taper” disappears, the bonds and the S&Ps go ripping higher again.
Yesterday the S&P rose to its fourth consecutive record close. From its low on Wednesday, Oct. 9, at 1640.00 to yesterday’s high of 1754.50, the S&P futures [ESZ13] has rallied 114.5 handles and has closed higher 8 out of the last 9 sessions with only one down day, Tuesday, Oct. 15. The last 5 up days accounted for a total of 54.4 handles. There is a congestion of resistance between the 1754.00 and 1765.50. The main question today is, has the bus gotten too full on the upside? We think so.
Big, gap-down opens are tricky. On many occasions the S&P will will make its low right on the opening print, but with the S&P up so much over the last 9 days we do not think that will be the case. Therefore, we lean to selling rallies. We are taking out the “buy weakness” side of the call. There are just way too many sell stops building up below.
As always, keep an eye on the 10-handle rule and please use stops when trading futures and options.
- In Asia, 8 of 11 markets closed lower: Shanghai Comp. -1.25%, Hang Seng -1.36%, Nikkei -1.95%.
- In Europe, 12 of 12 markets are trading lower: DAX -0.46%, FTSE -0.49% .
- Morning headline: “Asian Majors Take a Hit; S&P Seen Sharply Lower ”
- Total volume: 1.84 mil ESZ and 4.7k SPZ traded
- Economic calendar: MBA purchase applications, import export prices, FHFA house price index and the API