The Asian markets closed mostly lower and Europe is following suit. Yesterday saw lower prices — no surprise there. Over the last few weeks we pointed out where the stops were in the S&P from 1699 to 1706. The contract high was 1705.
After the algorithms ran the buy stops above 1700, the sell stops started building up. After the open the ESU fell into sell program levels and stayed that way until it made its low at 1685.25.
While the S&P futures did bounce, there was not a lot of buying attached to it. It’s clear to see the S&P is overbought, overextended, and overdue for a pullback.
Yesterday was a great example of how the algos can search out stops even in a thin market. Once the ESU lost premium and started trading at sell program levels, the algos did the rest of the driving. With so many stops below, sell programs ruled the day.
Yes, there was a late-day bounce (Goldman bought 300 SPUs and Morgan Stanley Smith Barney sold 400), but I am not sure the selloff is over.
As always, keep an eye on the 10-handle rule and please use stops when trading futures and options.
- It’s 7:15a.m. and the ESU is trading down 5.5 handles at 1688.50, crude is down 13 cents at 105.17 and the EC is trading 1.3305, down 2 pips.
- In Asia, 9 out of 11 markets closed lower: Shanghai Comp. down 0.67%, Hang Seng down 1.53%, Nikkei down 4.00%.
- In Europe, 8 out of 12 markets are trading lower: DAX down 0.37%, FTSE down 0.80%.
- Morning headline: ‘Taper Talk Sends Global Markets Down, Dollar Down”
- Total volume: LOW 1.27mil ESU and 4k SPU traded
- Economic calendar: MBA purchase apps, Gallup U.S. Job Creation index, API, 10-year note auction, consumer credit, Sandra Pianalto speaks
- MrTopStep Closing Print Video: http://mrtopstep.com/2013/08/mrtopstep-closing-print-08-06-2013/