The S&P Futures, the Fed and the Great Greek HOAX

One of MrTopStep’s trading rules is that “it takes days and weeks to knock the S&P down and only one to bring it back.” For the last several weeks the S&P has been weighed down by the Greek headlines, but Wednesday’s FOMC meeting had traders switching gears to the late afternoon headlines. May I remind you that MrTopStep has been saying for months that there will be no rate hikes in 2015? Wednesday’s headlines that the Fed may take a slower approach was exactly what the markets wanted to hear. This is where the Fed stands: two Fed officials see no rate increases this year, five see one interest rate increase, five see two rate increases and five see three rate increases, according to the Fed’s rate projections. MrTopStep’s projection was, and is, that there will be no rate hike until the first quarter of 2016.

BUY S&P / SELL BONDS

For many years the big global portfolio managers have been buying US stocks and selling European stocks. That is not how it looked a few months ago when Europe had taken the lead, but we’re back to that today. While the overall US stock market may not be exploding higher, the S&P continues to hold near the big figure at 2100.00. Even the S&P’s rival, the German DAX, looks like it’s trying to hold its ground at the 11,000 level. \

This is subject to change if the Greeks do not agree to a deal in the next few days as there are reports out that Greek banks may be closed on Monday. That said, the S&P continues to charge higher in the face of this uncertainty. It’s our feeling that there is some downside risk tied to a possible Greek default but we do not think the S&P will go crashing down when, and if, that happens. In the long run we still think the S&P is going up. Can we rule out of some type of knee jerk sell off? No, but we also cannot rule out some type of run to 2150. At least some of the Greece risk has to be priced in already.

On yesterday’s close the S&P futures (ESU15:CME) were up 25.5 handles, or +1%. After the big FOMC upside reversals, the S&P futures came to life on the open, and after the open was followed up by index arbitrage buy programs that came in on the half hour. The Dow Jones futures (YMMU15:CBOT) gained 218 points, or 1.1%, to 18044.00, just 1.2% shy of its most recent intraday record of 18344 last reached May 19. Nasdaq Futures (NQU15:CME) closed 76.50 points higher, or 1.3%, to 4538.00 in afternoon trading after touching a fresh high earlier in the session, helping to propel the Nasdaq Composite to its first intraday record in more than 15 years. The S&P and Dow futures both both remain just shy of the record highs they made in late May. As of yesterday’s close the S&P is up 3%, the Dow is up 1.6% and the Nasdaq futures are up 8.4%.

In the end, it is exactly like the PitBulls analogy that the S&P trade like “water in the bathtub”. Push the futures down into the sell stops and then push the futures back up into the buy stops.

In Asia 10 out of 11 markets closed higher (Shanghai Composite -6.42%), and in Europe 10 out of 12 markets are trading modestly higher this morning. Today’s economic calendar starts with Quadruple Witching, then John Williams and Loretta Mester from the Fed speak.

BRING ON THE JUNE QUAD WITCH

Our View: Remember the old song, “How long has this been going on?” Well it’s been 6 years running, that’s how long! And a lot longer than anyone ever thought. Sure the US stock markets are sluggish, and why shouldn’t they be, after gaining over 200% since the 2009 Credit Crisis lows! But that is not stopping the steady flow of new IPOs that are starting to hit the markets. Clearly some of the IPO’s are bringing new investor demand. That said, the Greek credit crisis continues to cast a dark cloud over the S&P. This morning the Russians are offering to help the cash strapped country. Our view is to sell the early rallies, and buy weakness, keeping in mind all the 2100.00 failures and the Greek headlines.

“The S&P Futures and the Great Fed/Greek HOAX”

• In Asia 10 of 11 markets closed higher : Shanghai Comp. -6.42%, Hang Seng +0.25%, Nikkei +0.92%
• In Europe 10 out of 12 markets are trading higher : DAX +0.20%, FTSE +0.31%, MICEX +0.16% , GD.AT -0.18% at 6:00 am CT
• Fair Value: S&P -7.88, Nasdaq -7.31, DOW -84.12
• Total Volume: 1.5mil ESU and 9k SPU traded
• Economic calendar: Quadruple Witching, John Williams Speaks, Loretta Mester Speaks.

[s_static_display]