S&P 500 Is Due For A Pullback
MrTopStep | Jun 01, 2016 09:22AM ET
The S&P 500 futures (ESM16:CME) stopped short of its 2103.75 Globex high, and crude oil futures (CLN16:NYM) sold off from a high of $50.10 and made a late day low at $48.81. The S&P futures sold off to 2086.00, and things could not have looked worse, but (and there is always a but) the MiM was showing over $1.2 billion to buy. Then the MiM increased to $1.4bil to buy, then $1.6bil to buy, and then up over $1.8bil to buy! What did the ESM16 do? It rallied up to 2097.00 at 3:50 ET, and then at 3:58 someone hit the sell button…In a matter of a few seconds the ES was double bottoming at 2090.50, and then traded up to 2094.50 on the futures close, down -0.13% ,or down 4.0 points on the day. In terms of the overall trade it was another slow day. In terms of the overall tone, the S&P was clearly weighed down by the -1% drop in crude oil, but in terms of the overall price action of the S&P, the sell off was long overdue and healthy.
We are going to stick with the theme. Is the S&P due for a pull back? Yes. Will it be a steep decline? No, it won’t be. We still think the pull backs will be shallow and they will be bought. Do we still think the S&P can trade back to 2030? Yes, and we see a possibility that the futures could go as far as 2150. Above there the bear will have covered and gotten long into the rally, and that will be when the S&P will start to pull back, or whenever the bears ‘flip’ from short to long. So whats next? The ESM16 has expanded its trading range, and while we still think it’s going higher, a few days of pulling back and a little back and fill be be good for the indices. Right now, short side inventory is low, but after a few days of dropping that will increase and add more buy stops above the markets.
Overnight, both oil and the S&P rallied initially, with the ESM16 trading up to 2099.25. As equity markets in Asia and Europe traded risk off, so did the S&P pushing lower to the 2086.50 print just above yesterday’s low, down 8.5 handles, and is currently trading at 2089.00 on globex volume of 172K at 6:55 am cst. Heading into today’s regular session, the globex low and yesterday’s low area of 2086 will be important, as the calendar has important numbers at 9:00 am cst. Prices below are 2080 and 2070. To the upside, bulls need to break the series of lower highs and close above 2100 today. While the stats show a down week, the first trading day of month has been up 5 of last 7, and was unchanged once after a gap down.
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In Asia, 7 out of 11 markets closed lower (Shanghai -0.11%), and In Europe, 10 out of 11 markets are trading lower this morning (DAX -0.82%). Today’s economic calendar includes Motor Vehicle Sales, MBA Mortgage Applications, Gallup U.S. Job Creation Index, Redbook, PMI Manufacturing Index, ISM Mfg Index, Construction Spending and Beige Book.
Our View: We have another busy day of economic reports, and while the ESM16 did stage a late day rally, crude oil is still suspect. Additionally, the week of the Memorial Day holiday has been down 11 out of the last 19 years, and Fridays jobs report could weigh on the S&P. Oil got up to $51.10, and in the after market sold off down to 48.75. My own feeling is that the CLN16 could be nearing a short term top. If that’s the case the S&P will suffer. Our view, get past the eco reports and keep an eye on yesterday’s low at 2086.00. Buy the early weakness (if they open lower), and sell the rallies, keeping in mind the Globex 2099.25 high.
- In Asia 7 out of 11 markets closed lower: Shanghai Comp -0.11%, Hang Seng -0.26%, Nikkei -1.62%
- In Europe 10 out of 11 markets are trading lower: CAC -0.90%, DAX -0.84%, FTSE -0.92% at 6:30 am CT
- Fair Value: S&P -1.71, NASDAQ -1.07, Dow -19.28
- Total Volume: 1.5mil ESM and 8.4k 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%
- DAX 9823.54-119.69 - -1.20%
- FTSE 100 6102.75-63.05 - -1.02%
- Euro 1.1216
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