The S&P futures traded in a narrow trading range on Friday. The futures sold off from an early globex high of 1968.75 down to 1943, and then late in the day the futures rallied back up to the 1950 area, only to fall back to 1941.50 on the close. The VIX was a low as 18.46 on the open, but went as high as 20.13 late in the day, before settling at 19.81. The late day equity selling was tied to bets about on whether the G20 could actually come out with some concrete step to stem some of the global weakness.
The focus this week will be February’s non-farm payroll number being released on Friday. The analyst consensus is hovering around 195,000 after January’s disappointing 151,000. Bank of America / Merrill Lynch released a note last week stating their expectations of a NFP print of 175,000. Their analysis suggests that the January number was disappointing due to the increase in colder weather coming off a seasonably warm November and December. Furthermore, the February number will continue to be impacted by higher temperatures including the winter storm Jonas effect into February.
This week is packed with economic reports, and despite the small selloff overnight, the futures are trading 27 handles off the most recent highs. What we know is that the worst start for the stock market in history still has the public overly concerned about a larger decline. While we can argue both sides of the coin we are starting to get the feeling that the S&P may try and move higher this week. There is still an abundance of buy stops above 1956 that go to straight up to the 1976 level and we all know that ‘no stops go untouched in the S&P.’ It’s going to be a long week of ups and downs…
Friday’s trade continued to show the relevance of the 1950 area that we spoke off last week. The ESH16 broke above that area during the globex session Friday and bulls needed a successful bounce from that area on the cash session retest. What happened was the price tried to bounce off that level throughout the regular session but the S&P couldn’t maintain a bounce before it was drawn back to that area and on the third test the futures broke through 1950 and pushed lower into the close as it once again become a ceiling for price action. We maintain that this price area will continue to be a pivotal risk marker for bulls and bears.
In Asia, 6 out of 11 markets closed lower (Shanghai Comp -2.86%), and In Europe 6 out of 12 markets are trading lower this morning (DAX -1.12%). The coming week has a high volume of economic reports that start out the week with some housing numbers and ends the week with the February jobs number on Friday. In all there are a total of 27 economic reports, 10 T-bill or T-bond auctions or announcements and one federal reserve bank president speaking. Today’s economic calendar starts with the Chicago PMI, Pending Homes Sales Index, Dallas Fed Mfg Survey and Farm Prices.
Our View: While the markets have been going up it looks like the ESH is setting up some type of trading range from 1920 to 1950. It can’t stay like this for very long. I am not saying the ES is going to go straight up but I do think it’s a good possibility we see some type of small break out to the upside this week. Today is the last trading day of February, there could be some type of walk away trade but as we head into the new month we tend to think the mutual funds may buy stock in the first few days of the month. Remember, March starts out ok but ends badly. Sell the early rallies and buy weakness keeping in mind there could be some type of sell on the close today.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets closed lower : Shanghai Comp -2.86%, Hang Seng -1.30%, Nikkei -1.00%
- In Europe 6 of 12 markets are trading higher: CAC -0.22%, DAX -1.12%, FTSE +1.06% at 6:00am CT
- Fair Value: S&P -2.29, NASDAQ -1.47, Dow -20.23
- Total Volume: 1.87mil ESH and 9k SPH
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