The S&P futures broke a 4 day losing streak Tuesday. After having one of the best Octobers on record, the the index made its high at 2110.25 on Nov 3 and basically lost momentum. A combination of traders taking money off the table, overbought conditions, and a mix of economic and earnings reports have helped stall the 6 week rally. After an early sell off the ESZ15 struggled to hold the rallies, but after selling off down to the 2065.00 area, the futures gradually traded up to the 2079.00 level late in the session. The day’s session was marked by small, low volume moves. Right now, the is S&P up over 12% since making its August 24 low.
Today is the US holiday, Veterans day. The markets are open but the banks are closed. In other words money can not move through the system. In most cases the holiday is marked as a low volume trading day, but just because the banks are closed does not mean the S&P cash is closed, nor will all the algorithmic and program trading. It will just be going on in a much lower trading environment. If traders learned anything about the sharp drop in the S&P in late August and late September, it’s that when the public is running scared, it generally makes for some of the best buying opportunities. During both of those declines I continued to say the S&P would go back to 2200.00 by the end of the year. While the markets have reacted in kind to the upside there are still 35 trading days left in the year.
Traders have done a big flip-flop, going from extremely negative into the decline, to extremely bullish into the rally. As the end of the year approaches there are going to be some down days. Not all the statistics are bullish. I have played the holiday seasonals for many years and there is a belief out there that the S&P goes straight up when it’s going into the best 6 months for stocks (November to April), but the reality of this is, it doesn’t work that way, or at least not very often. The main reason is there is a tendency for more traders to try and jump on the ‘end of the year rally’ and when the public jumps in too early the S&P pulls back, and that is kind of what I think we have been seeing over the last week. While I am an admitted bull I also know that shifts in sentiment play a very important role in the direction of the stock market and S&P 500.
It should be a quiet day because the banks are closed and money can not move. But today is not about the banks and it’s not about traders , it’s about the veterans of the United States that risked their lives defending this great country we live in. I can’t speak for other people, but I used to forget that…but I don’t any more. We as citizens, and our government officials, owe a debt to those who put their lives on the line. The thousands who have have died, and the thousands who have been injured, and there are still a lot of US veterans that are not getting the help they need. There are a lot of presidential debates going on, but not one person is talking about the debt we owe to the veterans. MrTopStep has already contributed to the Wounded Warrior Project and will again today. I hope you will too, https://support.woundedwarriorproject.org/default.aspx?tsid=66. Its not always about trading.
In Asia 9 out of 11 markets closed lower (Shanghai Comp. +0.70%), and in Europe 11 out of 11 markets are trading lower (DAX -1.06%). Today’s economic calendar includes the Veterans Day Holiday, the banks are closed but the exchanges are open.
Our View: Today’s trade should be slow. It’s 6:30am CT and the ESZ traded up to 2087.00 a little while ago, and is now trading 2085.25, up 8 bucks. When I made my call for the pull back I knew if the ES got weak it could go further, but I also saw the last two days of buy imbalances. Monday was $1.5bil to buy and yesterday’s MOC was $650mil to buy. Thats over $2bil to buy in two days, and yesterday’s ESZ volume was only 1.28 million contracts traded, and that included 217,000 from Globex. That is what MrTopStep calls ‘thin to win’. Our view for the day is sell the early rally and buy weakness. Start looking for the PitBulls Thursday / Friday low the week before the November expiration.
Get all of the November expiration stats here…
As always; please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets closed higher : Shanghai Comp. +0.27%, Hang Seng -0.22%, Nikkei +0.10%.
- In Europe 9 out of 12 markets are trading higher : CAC +0.70%, DAX -1.06%, FTSE +0.47% at 6:00am CT
- Fair Value: S&P -4.59, NASDAQ -6.22 , Dow -54.95
- Total Volume: 1.28mil ESZ and 3k SPZ
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