S&P 500 Futures Late Friday RIP
MrTopStep | May 31, 2016 09:32AM ET
A big part of trading is being able to read old and new price action. After a sell off down to 2022.00 last Monday, that price action went from negative to positive. Why? If you ask the ‘pros,’ they will give you several reasons, but very few will tell you that the real reason the S&P 500 rallied 77 points last week is simple, one thing and one thing only; zero borrowing cost. Will the Federal Reserve hike interest rates in June? Not according the the Chicago Board of Traders Fed Funds Rate Futures, which show that probability at 33%, but it’s not the June Fed meeting traders should be worried about… it’s the July meeting.
Today is the last trading day of May, and according to the Stock Trader’s Almanac, the day after Memorial Day has the Dow up 21 of the last 28 occasions. The Almanac also has the whole Memorial day week down 11 of the last 19 occasions, and that is followed up by the first trading day of June, which has the Dow up 20 of the last 27 occasions. Additionally, we have been seeing the tech stocks outperformed lately, that’s because June is the 9th best month for the NASDAQ. I have to say it like it is…No one believes the rally. Everyone continues to short the S&P, and some are short from a lot lower. I felt confident last Tuesday, when the futures were trading 2047, that the next fifty handles was up, but I must admit that I did not think it would happen so fast. I knew the weekly options expired on Friday and I had a strong feeling that no matter what Yellen had to say there was going to be a tendency to push the futures up late in the day. I was also very pointed that MrTopStep’s trading rule ‘thin to win’ would play out. So when you add it all up, last week’s buy fest was exactly what the bulls were looking for, and wanted.
So where are we? The shortened holiday week is packed with 25 economic reports, 9 T-bill or T-bond auctions or announcements, three Federal Reserve bank presidents speaking and the May jobs report. Post Memorial Day marks the unofficial beginning to summer, and the market sees a slowdown, which we have already started to see. However, with the Fed in the spotlight over meetings in June and July, as well as the Brexit vote, and with the S&P 500 at very critical resistance levels around 2100, this summer may not be as slow, especially with volume already surpassing last years at the May 30th mark.
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Overnight the S&P 500 futures remained higher for most of the session as the worldwide markets mostly saw weakness. For much of Monday’s globex session the ESM16 saw a trade above 2100, making a high of 2103.75 before backing off this morning to 2096, and is currently trading at 2098.50 on volume just under 200K at 6:30 am cst. Today’s calendar has some noticeable releases and today being the end of the month could present a decent trade. This morning’s 2096 low, which was the resistance from late last week, looks to be key. A break below could send the index down 10 handles to 2086, but holding this area will give the spoos a chance to retest 2100 and the 2103.75 globex high, as well as the 2105.50 April high. However, it should be noted that a globex high like this one that then fails in the regular session often opens the door for a 40 handle move lower. If we buy, we want to buy pullbacks, and if we sell, we want to pick our spots as carefully as possible.
In Asia, 6 out of 11 markets closed lower (Shanghai+3.34%), and In Europe, 8 out of 11 markets are trading lower this morning (DAX-0.35%). The shortened holiday week includes a total of 25 economic reports, 9 T-bill or T-bond auctions or announcements, three Federal Reserve bank presidents speaking and the May jobs report. Today’s economic calendar includes 2-Yr Note Settlement, 5-Yr Note Settlement, 7-Yr Note Settlement, 10-Yr TIPS Settlement, Personal Income and Spending, S&P Case-Shiller HPI, Chicago PMI, Consumer Confidence, State Street Investor Confidence Index, Dallas Fed Mfg Survey, 4-Week Bill Announcement, 4-Week Bill Auction, 3-Month Bill Auction, 6-Month Bill Auction, and Farm Prices.
Our View: A friend and fellow trader, Joseph P, asked me if there could be an end of the month ‘walk away,’ and here was my answer. “There could be some type of walk away but not everyone will be trading. The volume on Friday was 1 million and it never would have gotten that high if Yellen was not yapping. Pull back at some point? Sure, but the S&P is not going down; 2130, 2150-2160 on TAP.” Our view is the same, you can sell the early rallies and buy weakness or just wait for the pill back and buy em.
- In Asia 6 out of 11 markets closed lower: Shanghai Comp +3.34%, Hang Seng +0.90%, Nikkei +0.98%
- In Europe 8 out of 11 markets are trading lower: CAC -0.31%, DAX -0.35%, FTSE -0.13% at 6:30am CT
- Fair Value: S&P -1.96, NASDAQ -0.92, Dow -18.28
- Total Volume: 1.0mil ESM and 2.9k SPM traded
- E-mini S&P 5001986.25-12.00 - -0.60%
- Crude
- Shanghai Composite
- Hang Seng19694.33-132.08 - -0.67%
- Nikkei 22516646.66+1.97 - +0.01%
- DAX9823.54-119.69 - -1.20%
- FTSE 1006102.75-63.05 - -1.02%
- Euro1.1216
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