Risk will alway be a part of trading the S&P 500 futures. Whether it’s a domestic economic releases, a comment by the Fed or the Russian amy doing high-tech military drills on the Ukrainian border or the US attacking ISIS in Iraq, there is always doubt about what, if any, reaction the market will have.
This is why successful traders use technical analysis to define the upper and lower limits of any potential move and decide how to stay with the trend regardless of market direction. That’s what we advise today.
S&P roller coaster on Tuesday
Yesterday the ESU14 was up over 5 handles in GLOBEX, sold off to unchanged to lower just before the 8:30 open, rallied and then sold off and rallied and sold off again. Midday, a headline hit the tape about chatter on Twitter that the Islamic State (ISIS) had captured a large group of Kurdish Peshmerga forces and the ESU14 sold off again. And guess what? After the selloff the S&P rallied again in spite of a $600 million dollar sell imbalance on the close.
Stocks retesting resistance
Currently the DOW and S&P are up against some critical resistance at the 1943.00 level in the Emini S&P 500 (ESU14:CME) and 16,590 area in the Dow. Both failed on their first retest of the level this week and traders are watching to see if that resistance will be taken out. Above that the S&P will run into another big level of resistance at the 1952-1955 level and the next level above for the Mini Dow futures (YMU14:CBT) comes in at its May peak of 16,679. The Dow will be considered by most to have failed its rally if it breaks below its 200-day moving average, currently at 16231.
The Asian markets closed mostly higher and 7 out of 12 markets in Europe are trading modestly higher. Today’s economic and earnings schedule includes the MBA Purchase Applications, Retail Sales, New York Federal Reserve Bank President William Dudley opens workshop on wholesale funding risks in New York, Boston Federal Reserve Bank President Eric Rosengren’s speech at a workshop on wholesale funding risks in New York, Atlanta Fed Business Inflation Expectations, Business Inventories, EIA Petroleum Status Report, 10- Yr Note Auction and earnings from Deere & Company (NYSE: DE), Cisco Systems (NASDAQ: CSCO), Macy’s (NYSE: M), and Pinnacle Foods (NYSE: PF). Earnings from major retailers are expected starting tomorrow.
Our view
There is a decent number of economic releases out this morning and the Russian “humanitarian convoy” is heading to the Ukrainian border. This is going to be the next flash point for the S&P. If you’re a bull this is going to be a problem. Today’s S&P cash study shows today being up 19 / down 11 of the last 30 occasions. The S&P briefly topped 1940 in GLOBEX this morning but then faded.
Provided there are no Russian fireworks I think there is a good possibility the S&P keeps going up. Our view, sell the early rally, pay attention to the headlines and look to buy weakness. We don’t mean trade the headlines; watch them to get an idea of what the herd is reacting to. Not all the shorts have covered and there is a ton of stops above 1941.70 up to 1948.00. You can take it from there…
Video: S&P Back And Fill, And The Auggie Expiration
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 of 11 markets closed higher: Shanghai Comp. +0.06%, Hang Seng +0.81%, Nikkei +0.35%.
- In Europe 11 of 12 markets are trading higher: DAX +1.09%, FTSE +0.39%, MICEX +1.43%
- Fair Value: S&P -3.93 , NASDAQ -3.59, DOW -40.98
- Total Volume: 1.23M ESU and 3.9K SPU traded
- Economic and Earnings Calendar: MBA Purchase Applications, Retail Sales, William Dudley speaks, Eric Rosengren speaks, Atlanta Fed Bussiness Inflation Expectations, Business Inventories, EIA Petroleum Status Report, 10- Yr Note Auction and earnings from Deere & Company (NYSE: DE), Cisco Systems (NASDAQ: CSCO), Macy’s (NYSE: M), and Pinnacle Foods (NYSE: PF).
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