The S&P 500 Futures: Optimism Meets Pessimism
MrTopStep | Jan 23, 2017 11:25PM ET
The markets, the public, and the world, have never seen the likes of President Donald Trump. If he follows up on his tax cuts, his infrastructure programs, and rebuilding America, the markets may like his agenda. On the other hand, if he starts threatening China trade deals, talking negatively about NATO’s abilities, threatens Iran and N. Korea, and cozies up to Vladimir Putin, he will disrupt the ‘world order’ as we know it.
It’s going on 10:00 am CT Friday morning, and President Obama and president elect Trump have left the White House and are en route to the Capital. The index futures markets were quiet overnight Friday, with the (ESH17:CME), (YMH17:CBT) and the (NQH17:CME) all trading in narrow ranges, with no major news.
There is total lack of trading volume. There were 175,000 emini S&P futures traded before the 8:30 CT open, and at 10:00 total volume was 565,000 contracts traded. The rest of the trading session was a series of failed rallies, eventually pushing the ES down to 2259.75, up 1.75 handles. Every drop for the (ESH17:CME) was followed by a rally that failed at the VWAP, until the final minutes of the session when the futures finally traded above the VWAP, but only by 2 or 3 ticks. At the end of the session there was over 1.7 million emini futures traded.
h2 Is The Trump Rally Running Out Of Gas?/h2The Dow Jones futures (YMH17:CBT) have closed lower 6 out of the last 9 sessions, the S&P 500 futures (ESH17:CME) have closed down 5 out of the last 9 sessions, and the Nasdaq 100 futures (NQH17:CME) have closed lower 2 out of the last 5 sessions. The Dow futures are now only up .25% in 2017, the ESH17 is up 1.5%, and the NQH17 is up 4.75% accordingly. There is quite a bit of chatter going around that now that the Trump inauguration is out of the way, traders see few reasons for stock to continue higher. Weighing down major stock indexes was weakness in the banking sector. Morgan Stanley (NYSE:MS) closed down -1%, Goldman Sachs (NYSE:GS) fell 1.2%, and Citigroup (NYSE:C) lost 1.3%.
So, did the people of the United States, and the world, like what Trump had to say? It looked like the folks that went there did, but his speech did not say much about unity, and his first act as the president of the United States was to repeal Obamacare. Divisive? Yes. There have been anti Trump rallies across the US, and the world, and they say they are going to continue. Constructive? That’s to be seen, but for the millions of Americans that depend on Obamacare, it’s just another big worry. Despite it not working up to this point, many big investors are starting to taper their bullish bets, and have turned to defensive hedging strategies to fend off a possible rise in volatility.
h2 My Street Smarts Say…/h2
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2017 is going to be a very volatile year. As the new president of the United States takes over and shakes the global status quo the markets are going to get shaken up. The current currency wars are only going to get worse. Stocks that have risen 10% since the election can still go higher, but not by very much. At some point the markets are going to get a wake up call and fall out of bed.
As I said over 3 months ago, 2017 is going to be the year of the ‘shake out,’ and I am not just saying one or two. I think President Donald Trump is going to cause unprecedented movement in the global stock markets as he initiates some of domestic and foreign policies. The VIX will not stay down like it has for very long. My guess is that in the next 60 to 90 days (if not less) the markets will start to fall. With bullish sentiment at an 18 month high, the VIX trading so low, and over a full 11 months of trade left in 2017, you can bet there are going to be a lot of high and low points. My street smarts say Donald Trump will shake things up a lot before he settles into the realities of the ‘real world’.
h2 While You Were Sleeping/h2Overnight equity markets in Asia were mostly higher, followed by a European session that was mostly lower. The S&P 500 futures opened globex at 2266.00 and made a high of 2266.50 before turning weak and trading down to 2258.00, down 6 handles, early in the European session. Since then, the futures rallied modestly up to 2263.75 and have last printed 2262.25 on volume of 111k at 6:19 am cst.
In Asia, 8 out of 11 markets closed higher (Nikkei -1.29%), and in Europe 9 out of 11 markets are trading lower this morning (DAX -0.38%). This week’s economic calendar includes 18 economic reports and 12 U.S. Treasury events.Today’s economic calendar includes a 4-Week Bill Announcement, a 3-Month Bill Auction, and a 6-Month Bill Auction.
h2 Our View:/h2The next few weeks are going to be important for the markets. It’s hard for me to believe that President Trump will not continue as he has. I said it along time ago… how do you tell a billionaire to shut up? You don’t, and now that he is wearing the presidential title, it’s going to be impossible.
Our view; up and down and all around is what to expect this week, and going forward. I do not think the ES starts to turn south right away. My gut says there could be a blast up to DOW 20k, or even ES 2300, but I do not think there is an extended rally coming. I think there is near term upside risk, but the higher the ES goes, the bigger the risk of a larger turn south. Today is “Mutual Fund Monday,’ which has been up 6 out of the last 10 occasions. Sell the early to midday rallies and buy weakness. 2255-2258 is a key support level.
Market Vitals for Monday 01-23-2017
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets are trading higher: Shanghai Comp +0.44%, Hang Seng +0.06%, Nikkei -1.29%
- In Europe 9 out of 11 markets are trading lower: CAC -0.29%, DAX -0.38%, FTSE -0.29% at 6:00am ET
- Fair Value: S&P -4.54, NASDAQ -3.82, Dow -66.17
- Total Volume: 1.7m ESH and 9.2k SPH traded
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