41st new high of 2014 for S&P 500

Our View, S&P 500

ES 12-14 (5 Min)  11_14_2014

Yesterday the S&P 500 (^GSPC:SNP) made its 41st new contract high of 2014. While the futures are not on the record pace of 2013, the most recent drop and quick rally back shows how resilient the S&P, Dow Jones (^DJI:DJI) and NASDAQ composite (^IXIC) are.

After opening higher in Globex, the S&P futures (ESZ14:CME) double-topped at the 2043.00 level (which it had reached already overnight) and then got hit by a wave of selling. The ESZ14 then dropped down to 2030.25, and then shopped around in a narrow range going into 12 o’clock central time.

When the ESZ14 was going up, the PitBull continued to point out that the QCHA was -7. While the reading was not a strong reading, it showed that while the S&P was going up there was selling going on below the surface. Additionally the Russell 2000 was weak, and with the ESZ14 using up so much early buying power the algos then targeted the Globex low of 2026.75.

After the low the ESZ15 rallied back to 2037.50 and then started pulling back again into 12:00 CT. Crude oil just printed down to 74.96 after Chinese data showed a slowdown in activity. Just after that the ESZ14 sold back off down to 2031.50. After the early high the overall price action flipped and really never got better.

The next the S&P ran the stops at 2030.00 down to its new low at 2026.75 preceded by a bounce back up to 2031.00 and back up to 2032.00. The next move was back down to 2037 and back up to the 2035.00 area and then up to 2038.00. On the 2:45 cash close the MOC showed BUY $ 550mil, on the 3:00 cash close the ESZ14 traded 2036.00 and went on to settle at 2034.00 on the 3:15 futures close.

In the end yesterday’s trade was another good example of what I wrote about in yesterday’s Opening Print: that while the ESZ14 can sell off, it just can’t gain very much momentum.

Down days since Oct. 15:
Oct 22 -14.25
Oct 27 -2.6
Oct 29 -7.9
Nov 3 -.30
Nov 4 -5.6
Nov 7 -2.0
Nov 12 -.60
Nov 13 -2.0

In Asia 9 of 11 markets closed higher and in Europe 9 of 12 markets are trading lower. Today’s economic schedule includes Retail Sales, Import Export Prices, James Bullard speaks, Consumer Sentiment, Business Inventories, EIA Natural Gas Report, Stanley Fischer speaks and earnings from Springleaf Holdings LLC (NYSE: LEAF) and Forbes Energy Services (NASDAQ: FES).

Our view

Now any time the S&P sells off 10 or 12 handles people think the end of the world is coming. Traders still have the mindset that the S&P could sell off again. Personally I don’t think that’s in the cards. Even a drop of 30 to 50 handles would be a lot. Our view is that there could be another retest of yesterday’s low. The overnight and early morning triple top may be followed by a triple bottom at 2026.75. Sell the early rallies and buy weakness.

MrTopStep Meets the BULL

November expiration study link: http//dev.mrtopstep.com/?p=53835

As always, please use protective buy and sell stops when trading futures and options.

  • In Asia 9 of 11 markets quoted closed higher: Shanghai Comp. -0.27%, Hang Seng +0.28%, Nikkei +0.56%
  • In Europe 9 of 12 markets are trading lower: DAX -0.41%, FTSE -0.24%, MICEX +0.34%
  • Fair value: S&P -2.99, Nasdaq -3.23, Dow -38.13
  • Total volume: 1.55Mil ESZ and 10K SPZ traded
  • Economic schedule: Retail Sales, Import Export Prices, James Bullard speaks, Consumer Sentiment, Business Inventories, EIA Natural Gas Report, Stanley Fischer speaks and earnings from Springleaf Holdings LLC (NYSE: LEAF) and Forbes Energy Services (NASDAQ: FES)
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