Volume in the S&P futures (ESU15:CME) fell Wednesday to 1.5 million contracts traded compared to Tuesday’s 2.3 million ESU contracts traded. Things are starting to “thin out”.
The S&P futures rallied yesterday as Greece negotiators signaled they are willing to compromise. In turn traders started covering some short positions as many traders now think there could be some type of “last minute deal”. That said, Greece’s financial situation will continue to drive the markets until we move beyond just hoping that a deal can be reached.
Around midday yesterday, the major averages showed gains hovering around the half percent mark. Equities spiked as European markets strengthened on reports that Greece is willing to accept all conditions set forth to ensure a bailout occurs. This was followed by a drop in the S&P futures, narrowing the day’s gains, only to see the futures rally back up to the 2071.00 area late in the day. It seems like all the movement in the index markets could be attributed to the never ending Greek headlines.
In a twist of fate, there was a story out yesterday that German chancellor Angela Merkel admitted in a 2011 phone call that Greek debt would be unsustainable even after a second debt write-down, according to a phone call intercepted by the NSA. Below is a copy of the transmission.
It’s hard to believe that Merkel, who has championed to get a Greek deal done, would continue to push a deal that she believes is unsustainable. It truly shows how the latest deal, as we have said all along, is just kicking the can down the road, especially knowing that the new deal will only last 6 to 9 month.
Over in Asia, China’s stock market continued to exhibit volatile swings and ended with the Shanghai Composite Index in bear territory. Gold futures ended up dropping 0.2% to $1169.00 an ounce, and crude oil fell 3.9% to $57.16 per barrel, respectively.
This morning there is a noticeable drop in Globex volumes. As I said earlier in the week, by Wednesday more and more traders will start to take time off. With the Greek referendum set for Sunday, we do not expect the non-stop headlines like we have been seeing over the last several days. We expect a much slower grind today.
In Asia 8 out of 11 markets closed higher, and in Europe 12 out of 12 markets are trading this higher morning. Today’s economic calendar includes: Employment situation, Jobless claims, Factory orders, EIA Natural Gas Report, 3-Month Bill announcement, 6-Month Bill announcement, 3-yr Note Announcement, 10-Yr Note Announcement, 30-yr bond announcement, Fed balance sheet, and money supply.
Our View: The slow grind begins. Today all the products on the CME Group close at 12:00 or 12:15 CT with the exception of the S&P futures which will be open all day. After yesterday’s sell off back down to 2060 the ESU15 started to rally / short cover again and this morning is only a few handles off yesterday’s 2077 high. I do not pretend to know it all but I have seen the ES rally over the 4th of July many times. There is a lot of data out this morning, but beyond that, I think the S&P heads back to the 2090 level, that is where a big concentration of buy stops sit. I bought my cheap calls on the pull back and I am going to let them do the heavy lifting for me today.
“The S&P 500 and the Greek Concessions”
- In Asia 8 of 11 markets closed higher: Shanghai Comp. -3.48%, Hang Seng 0.12%, Nikkei 0.95%
- In Europe 12 out of 12 markets are trading higher: DAX +0.06%, FTSE +0.28%, MICEX +0.34%, GD.AT +2.03% at 7:00 am CT
- Fair Value: S&P -8.33, Dow -94.06, Nasdaq -9.36
- Total Volume: 1.5mill ESU and 13k SPU traded
- Economic calendar: Employment situation, Jobless claims, Bloomberg Consumer Comfort Index, Factory orders, EIA Natural Gas Report, 3-Month Bill announcement, 6-Month Bill announcement, 3-yr Note Announcement, 10-Yr Note Announcement, 30-yr bond announcement, Fed balance sheet, money supply.
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