The Asian markets had a mixed close and Europe is mostly rallying on news of revival in the eurozone economy. Yesterday the Dow closed on a new all-time contract high, the NASDAQ broke its winning streak and the S&P closed fractionally lower. Whenever there is so much anticipation of a big figure (1700) there is a tendency for the S&P to pause as it closes in on the level. Believe it or not, traders tend to sell into these all-important levels. Sometimes it works and sometimes it doesn’t.
We have said it before and we will say it again: Some traders do not believe volume matters, but I think that’s crazy. When the total volume in the S&P 500 E-mini is under 1 million contracts during the day session, it means between 50% and 70% is some type of electronic program. 50% program volume would be considered low and 70+ would be on high. Either way, on a low volume day you at least know where the chop is coming from. It’s even worse when you add in the Globex volumes. At the height of the Fed’s taper talk the S&P was doing 2.5 to over 3 million ES a day. Today it’s one-third of that.
There is little doubt that the S&P is going to take out 1700. What the S&P needs now is a few days of pulling back. That gives it a chance to back and fill. There are stops from the high 1699s to 1706. Our view is that the S&P still wants to go higher but that you can’t rule out a few days of rest time. We said the S&P would not trade 1700 during the July expiration and we were right. So far there have been several two-day pullbacks, but there have yet to be three straight down days in the S&P futures so far this year. That said, we lean to buying weakness with tight stops. 1700 is just a number like 1300, 1400, etc., etc. …
- It’s 8:30 a.m. and the ESU is trading 1693, up 4.75 handles; crude is down 38 cents at 106.85; and the euro is down 14 pips at 1.3221.
- In Asia, 6 out of 11 markets closed higher (Shanghai Comp -0.52%, Hang Seng +0.24%, Nikkei -0.32%).
- In Europe, 11 out of 12 markets are trading higher (DAX +0.98%, FTSE +0.81%).
- Today’s headline: “U.S. Stock-Index Futures Rise After Apple Beats Estimates”
- Total volume: 0.98mil ESU and 6.55k SPU
- Economic calendar: MBA Purchase Applications, PMI Manufacturing Index Flash, New Home Sales, EIA Petroleum Status Report, and 5-year Note auction
- Fair value: S&P 1687.14; NASDAQ 3024.5
- MrTopStep Closing Print Video: http://mrtopstep.com/2013/07/mrtopstep-closing-print-7-23-2013/
The S&P futures have closed higher 14 out of the last 16 trading days and are up 89 handles.