S&P 500 Futures: Up a Day, Down a Day

Charts, Commentary, News, Our View, Stocks, Technical Analysis, The Opening Print

chart 05-12-2016

Traders can run, but they can’t hide, from the constant ‘chop’ of the S&P 500 futures. After the big sell off in August, and retest of the 1804 level on Feb 11th, the S&P moved all the way back above 2105.25, then traded back down to 2030 during last week’s jobs number (Counter Trend Friday), and then proceeded to rally all the way back up to 2079.75. That day the futures posted their largest one day advance in nearly two months. The S&P had the feel and look that it was going back to S&P 2100.00, but yesterday’s trade gave back almost all of Tuesday’s gains. According to LPL Financials’ Ryan Detrick, Wednesday’s 217 point Dow drop has only happened 22 times since December of 2000. As they say, the market gives and the markets take, but not very often does it give so much and take so much the day after such a big rally. While these types of occurrence do not happen very often, it sure makes it hard to be overly confident about the overall direction, up or down. After closing up 1.03% on Tuesday the S&P fell 1.0%, its largest decline since Feb. 11.

broke dealsThe S&P 500 futures rallied sharply after the crude oil inventories, but that early rally seems to have used up all the buying power. Overshadowing the rally was the Justice Departments successful blocking of the proposed Staples Office Depot merger on antitrust grounds. The blocked merger is part of a record amount of merger deals that have fallen apart in 2016. The chart below does not include the Staples / Office Depot deal, but is a great example of positive expectations being pulled from the marketplace.

Overnight the S&P 500 futures traded down to 2057.50, and at 7:45 am CT were trading 2071.50, up 13.50 points. The main driver of the the rally in the S&P was the the push up to $46.92 in crude oil futures (CLM16:NYM), trading at its highest price since November 4th. The S&P is continuing to show its resilience even after buyers have dried up at these levels and sellers put in a decent day. Bears are still unable to build any meaningful advances thus far and price currency sits fewer than 10 handles from yesterdays two week high, and just over 30 handles, or 1.5%, from this year’s high.

Heading into today’s cash open, the 2079.75 high from yesterday will be a pivotal area, and will likely be a good initial fade. However, if buyers can push to close near or above this level, then they will have the path to push the ESM to it’s highest weekly close this year above 2086. To the downside, yesterday’s 2058 low area was retested, and held, in globex and pretty much becomes the line in the sand for bulls. This should be good for an initial bounce, but a retest failure opens the door to 2050 then 2038. Today’s calendar is again relatively light and the overnight volume sits at 205K at 7:00 am CST. It’s hard to speculate how many more times bears can fail to continue weakness, and with the S&P opening higher this morning, if first hour range keeps the ESM above 2067 then the low volume will kick in leading to higher prices and a thin to win rally. I’ll be the first to admit that the chart looks weak, but right now the dip buyers are showing their consistency, while sellers still seem to be unsure.

In Asia, 6 out of 11 markets closed lower (Shanghai -0.04%), and In Europe, 11 out of 12 markets are trading higher this morning (DAX +0.91%). Today’s economic calendar includes Jobless Claims, Import Export Prices, EIA Natural Gas Report, Cleveland Federal Reserve Bank President Loretta Mester speaks on monetary policy in Reichenau Island, Germany, Boston Federal Reserve Bank President Eric Rosengren speaks in Concord, New Hampshire, 30 Year Bond Auction, and Kansas City Federal Reserve Bank President Esther George speech on the economy, in Albuquerque, New Mexico.

Our view: Low volume on the up days and larger volume on the down days. That’s how this works. In the world of trading, the best path is to take profits when you can, and limit your losses. With the big push back up overnight in the ES, and crude oil futures pressing the 47.00 level, we see resistance in the ESM16 at the 2076.00 to 2080.00 level. Our view is sell the early rallies and buy weakness keeping in mind the PitBull Thursday / Friday low the week before the May expiration. As always, use stops when trading futures and options.

bootcamp dog tagsThe MrTopStep BootCamp is May 16-20. It’s a very impressive line up of traders that would be hard to find any place else. We have always considered our traders as part of a collective, sharing ideas, price levels and any pertinent news that may be moving the markets. This bootcamp is especially loaded with with top tier traders. If you have never joined the bootcamp I suggest you do. Not only will you see how they do it, you will be able to watch the live trading. There really is no other trading education service like this, and it’s unique to the retail trading business, but it’s not all retail. Many of the things we use and talk about are exactly the same stuff we worked with on the trading floor when we were talking to the big banks and hedge funds (too bad they didn’t listen). That said I have posted the weekly schedule for you to review and the link to the sign up.

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

    • In Asia 6 out of 11 markets closed lower: Shanghai Comp -0.04%, Hang Seng -0.70%, Nikkei +0.41%
    • In Europe 11 out of 12 markets are trading higher: CAC +0.86%, DAX +0.91%, FTSE +0.38% at 6:30am CT
    • Fair Value: S&P -4.18, NASDAQ -5.77, Dow -51.22
    • Total Volume: 1.4mil ESM and 5.4k SPM traded
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