Yesterday at 1 p.m. CT, the ESU (S&P e-mini futures) had sold off from a 1650.00 high after the open down to its low of 1631.00.
After 35 years on the trading floor, I have to ask: What did you expect? After the ESU rallied Sunday night and was sharply higher during Monday’s abbreviated trading session, everyone was seeing the same thing—the shorts being chased out because there was no Syrian attack.
Once that was accomplished, the ESU reversed back down, with help from House Speaker John Boehner (R-OH) saying he backed the president on the Syrian attack plans.
The news that President Obama was not going to order an attack was a good enough reason for the rally, but not good enough to cure all of the S&P’s problems.
Attack or no attack, the S&Ps still have room on the downside. The budget battle, the two-day Fed meeting next week, the September quad witch and the end of the 3rd quarter rebalance are all news items we’ve listed before. When you add them up, it equals volatility.
On the first trading day of September the spoos sold off 19 handles and bounced 8+ handles late in the day, without any of the above events having happened yet and without an imminent attack in the headlines. Just wait till Thursday and Friday when the ADP and jobs numbers are released. Fasten your seatbelts.
The Asian markets closed mixed and Europe is trading lower. Today we have 7 economic numbers, two Fed governors speaking, and a Senate Foreign Relations Committee vote on a Syria resolution. That should be enough to keep things rolling.
The 50-day moving average comes in at the 1660 level with resistance at the 1666 to 1668 level. Yesterday once the ESU started selling off, the premium between the S&P and the S&P cash slipped into sell program levels. After that it was just one sell program after another.
Look for a two-way trade. Buy the early weakness and then sell the rally. There still could be some first-of-the-month money going into stocks but the overall tone and the negative headlines should prevail.
As always, keep an eye on the 10-handle rule and please use stops when trading futures.
- In Asia, 7 out of 11 markets closed lower (Hang Seng -0.31%, Shanghai Comp. +0.21%, Nikkei +0.54%).
- In Europe, 9 out of 12 markets are trading lower (DAX -0.70%, FTSE -0.47%)
- Morning headline: S&P 500 Futures Seen Lower As Obama Gets His Way
- Total volume: 2.3 million ESU and 14.9k SPU (mostly ETFs) traded
- Economic calendar: Motor vehicle sales, MBA purchase apps, Gallup US job creation index, international trade number, Redbook, quarterly services
survey, John Williams speaks, Beige Book, Narayana Kocherlakota speaks.
- MrTopStep Closing Print Video