Santa and the S&P 500 Futures; Right on Time

Commentary, News, Our View, The Opening Print


On Monday’s open the S&P futures looked weak early and found a low at 2035.00 then rallied into the afternoon’s close settling at the 2050 level that we have been mentioning as of late. That rise to settle back at this pivotal price was one clue that this market wanted to attempt a rally to close the year on a positive note. Overnight, the global markets reacted to the U.S. rally, and the light economic calendar, as the S&P led the rally, opening the cash session 10+ handles higher and rallying almost non-stop during the regular session Tuesday settling at 2072.75, just ticks off the highs.

Now the index is up 1% on the year, and the Santa Rally that seemed unlikely just a few sessions ago to many people, is now becoming a possibility. That Santa Rally did indeed show up bringing with it a realistic chance of 2100 before year end close.

From the time the futures first touched 2100 early in the year we have been highlighting that level as the pivotal magnet of 2015, and it would almost seem fitting that the index has unfinished business up there, and bulls on their last breath try to reach that area. Furthermore, many fund managers this year have failed to meet the S&P 500 performance as market timers have often been on the wrong side of this choppy/volatile hot/cold market. Many of them must be eager to see a rally stretch in these final sessions as the benchmark has now turned positive and could conceivably continue its rise this week to ensure optimistic bulls that this bull market is not dead.

We have been saying that no matter how weak the equity indexes have looked, it’s hard to fight the seasonal tendency to rally. As we mentioned last week, “thin-to-win” has begun to play out and it is meeting expectations, a low volume, slow grind higher.

MrTopStep is sticking with his ‘thin to win’ trading rule right into the end of the year. That doesn’t mean there will not be some selling late Thursday.

Date                 ESH16:CME Close Volume Net Change
Dec 17 2024.75 2,108,759 – 39.00
Dec 18 1992.00 2,105,533 – 32.75
Dec 21 2015.00 1,269,272 + 22.00
Dec 22 2036.00 1,142,331 + 21.00
Dec 23 2053.00 1,003,210 + 17.00
Dec 24 2051.25 323,112 – 1.75
Dec 28 2050.00 694,593 – 1.25
Dec 29     2072.75 829,702 +22.75

As you can see above this is not the first time we have pointed this out. After a big pick up in volume and volatility, the S&P will eventually ‘level off’, and as volume drops or subsides the futures will rally. It does not matter what the occasion is once the short covering starts and the buy programs start to kick in, it’s ‘Lights out London’ for the bears!

In Asia, 6 out of 11 markets closed higher (Shanghai Comp +0.26%), and in Europe 6 out of 12 markets are trading higher (DAX -0.80%). Today’s economic calendar includes MBA Mortgage Applications, Pending Home Sales Index, EIA Petroleum Status Report, 7-Yr Note Auction, and Farm Prices.

T+3 and Counting

Our View: Bull or Bear, I do not think either can argue with ‘thin to win’ and the current upside rip. The mutual funds are selling the bad stocks and marking up the big winners with the tech stocks leading the charge. It’s a faceless battle right now; a few good men against thousand of unwanted robots. Even in the final hours of 2015 some are still fighting. Yesterday I was very direct in my view: buy weakness if you’re going to trade. Today I am a tad less bullish. While I still think higher prices, I also know the 2080-2090 area is big, and you probably do not want to be long into the first push. It is important to understand who you’re battling with; there are more robots than humans trading, and for all practical sakes, our call is to push back from the screens. Don’t get chopped up in the end of the year chop.

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


    • In Asia 6 out of 11 markets closed higher : Shanghai Comp +0.26%, Hang Seng -0.53%, Nikkei +0.27%
    • In Europe 6 of 12 markets are trading higher : CAC -0.17%, DAX -0.80%, FTSE -0.41% at 5:00am CT
    • Fair Value: S&P -7.44, NASDAQ -6.76, Dow -90.14
    • Total Volume: 832k ESH and 8.1k SPH
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