Yield Curve Inverts, Surprise Rate Cut Could Be Coming

Charts, Commentary, News, Stocks, The Opening Print


Index Futures Net Changes and Settlements:

ContractSettlementNet Change+/-%
S&P 500 (ESU19:CME) 2932.00+51.75+1.79%
DowJones (YMU19:CBT)26,314+4474+1.72%
Nasdaq 100 (NQU19:CME)7748.00+181.25+2.39%
Russell 2000 (RTYU19:CME)1513.70+20.60+1.37%

Foreign Markets, Fair Value and Volume:

  • In Asia 9 out of 11 markets closed higher: Shanghai Comp +0.08%, Hang Seng +0.42%, Nikkei +0.98%
  • In Europe 13 out of 13 markets are trading lower: CAC -1.67%, DAX -1.84%, FTSE -1.14%
  • Fair Value: S&P +0.66, NASDAQ +10.35, Dow -21.54
  • Total Volume: 2.17 million ESU & 423 SPU traded in the pit

*As of 7:00 a.m. CST

Today’s Economic Calendar:

Today’s economic calendar includes the MBA Mortgage Applications 7:00 AM ET, Import and Export Prices 8:30 AM ET, Atlanta Fed Business Inflation Expectations 10:00 AM ET, and the EIA Petroleum Status Report 10:30 AM ET.


S&P 500 Futures: Trump Tweets Set Off Explosive Rally

Chart courtesy of Scott Redler @RedDogT3$spx futures -30 as the Inverted Yield Curve Raises Volatility.

During Monday nights Globex session, the S&P 500 futures (ESU19:CME) printed a high at 2889.50, a low at 2866.75, and opened Tuesday’s regular trading hours (RTH) at 2879.75.

Twitter rants ruled the tape yesterday. I really don’t think that’s up for debate. The news algo’s were fully charged, and they didn’t miss a headline.

After opening RTH basically unchanged on the 8:30 CT bell, it almost felt like Trump timed his tweets to coincide with one of the most volatile periods of the day. I say this because, just after the bell, news of Trump putting off additional Chinese tariffs that were scheduled for September 1, and news of another meeting being scheduled with Chinese officials sometime in the next 2 weeks hit the tape, and stocks blasted off.

In the first hour of trading, the ESU rallied close to 70 handles, stopping dead in it’s tracks at the 50 day moving average. Turn-Around-Tuesday came through early, and in a big way, and all the weak shorts that piled in over the last few trading sessions got blown out.

Once the smoke started to clear, another headline hit the tape out of China concerning the military and protesters at Hong Kong International Airport, and the same algo’s that drove the rally began to fuel a reactionary selloff. By 10:30, the ES had traded back down to 2917.50, 26 handles off the high. 

That was it for the wild swings. From there, the futures did some back-and-fill up 2937.25, and then settled into a nice 10 handle range for the rest of the day.  

Going into the close, when the MiM reveal showed $500 million to sell MOC, the ES was trading at 2925.75. It would then go on to print 2927.25 on the 3:00 cash close, and 2932.25 on the 3:15 futures close, up +52 handles on the day.

In terms of the markets overall tone, it went from a weak three day decline, to one of the largest rips we’ve seen in months. In terms of the overall volume, over 2 million mini S&P 500 futures contracts traded.


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Danny Riley (3065 Posts)

Danny Riley has worked in the futures and options industry for 38 years, including the CBOT’s bond room, where he worked for several of the Market Wizards. He went on to build the largest volume desk in the S&P 500 Index Futures, serving some of the largest banks and hedge funds, the UBS program trading business, and some of the world's top individual traders. As a leader and co-creator of the MrTopStep IM-Pro Trading Room, he shares trading ideas and breaking market news live from the floor with our other professional traders and new traders eager to experience the power of collective intelligence. Join us today and get the edge only social trading can give you.


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