S&P 500 Pac-Man Eating Everything in its Path

Charts, Commentary, Our View, S&P 500, The Opening Print, Video

Trend day 73

After such a rough week of ups and downs, and all the trading and writing I did, I’m going to stick to my original idea that the S&P will ‘make it past’ the August expiration and then get weak again as the markets moving into the final trading day of the month and into the turbulent months of September and October. Sometimes its hard to say anything new, and repeating the same stuff over and over is not helping anyone either.

Over the last several months, the S&P has been eating through the all of the negatives. Greece, China, weak earnings and economic reports, only to push the S&P futures (ESU15:CME) back above 2090.00 in last Friday’s close. I know that there is a lot more involved than my theory about how the S&P uses index arb. to help push the algos into running all the buy and sell stops. What I do know for a fact is that 75% of all the volume in the S&P is generated by computers that people turn on and turn off, and who, more than likely, have never trade a futures contract on their own. During the Greek credit crisis volume jumped to over 2.5mil, and when the settlement was agreed upon, volume slipped back to under 1 mil contracts a day. Then the China ‘bubble’ talk pushed the volume way back up, and last Friday it dropped down to 1 million contracts traded in one day. In both cases, as the volume dropped, MrTopSteps trading rule ”Thin to Win” prevailed.

So far, 92% of the companies in the S&P have reported earnings. As the S&P heads into the end of the earnings season, which again did not go as bad as Wall Street analysts expected, there is a sense that the S&P again has gotten past what ‘could’ have been a very negative period for stocks. I contend that there has never been a time like investors are seeing today, and no matter what funnel your taking, it all comes down to one thing; zero borrowing cost and no place to go but stocks. I understand buying and selling, but what I don’t understand is why every time the S&P sells off, traders still have the mindset that a crash is coming instead of using the hysteria as a buying opportunity, instead of being part of a major short squeeze? At the end of the day there is always going to be something that the markets must get past, its just how you trade it that matters. What we do know is when everyone gets loaded up in one direction it’s usually time to start thinking the other direction. In many ways this is why the all the market timers are so far off on what they write and how they forecast the stock market. As I have said many times; there has never seen a time like we are seeing today. I do not have any doubts that eventually the stock market / S&P will correct, I just do not think it will be anytime soon. Tale Robert Prechter, from Elliott Wave, has been calling the stock market wrong for so long I am not sure why people would even consider reading it.

I don’t know how long the markets have on the upside, but right now I see no real change in the overall price action of the S&P. I understand that it can’t go on like this forever, but as I have always said, I am not here to fight city hall and if the markets are going up or down I want to go for the ride. We are not here to decide long term direction, we are here to trade it. Our goal is to pick the right levels in which to buy or sell, and to get in and get out, and not fall in love with our positions. You do not have to have an opinion as a scalper.. you just have to pick the right level and time in which to buy and sell.

The S&P will always have something to get past. It was Greece, then China, and now Puerto Rico. Its just noise to me..

In Asia, 6 out of 11 markets closed lower (Shanghai Comp. +0.71%), and in Europe 7 out of 12 markets are trading modestly lower (DAX  +0.20% ). This week has a very small economic and earnings calendar. There are a total of 12 economic reports, 11 T-bill or T-bond Auctions or Announcements, 1 Federal Reserve Bank President speaks and FOMC Minute.Today’s economic schedule starts with the Empire State Mfg Survey, Housing Market Index, E-Commerce Retail Sales, 3 & 6 Month T-bill Auction, and earnings from EL, URBN, A , MTZ, FN, ANW, HTHT, and CCM.

Our View: The S&P cash study show the Monday of the August expiration being up 21 / down 10 of the lost 31 occasions. All I can say is this, the S&P is not going up or down sharply, but I do think the risk is to the upside this week. Our view is to buy the early weakness and sell rallies.

“The S&P Futures and an Inside Day”

    In Asia 6 out of 11 markets closed lower: Shanghai Comp. +0.71%, Hang Seng -0.74%, Nikkei +0.49%

  • In Europe out 9 of 12 markets are trading higher : CAC +0.43%, DAX +0.20%, FTSE+0.09%, MICEX -0.31%, at 5:30 am CT
  • Fair Value: S&P -3.93 , NASDAQ -4.50 , Dow -41.85 .
  • Total Volume: LOW 1mil ESU and 2k SPU traded
  • Economic calendar: Empire State Mfg Survey, Housing Market Index, E-Commerce Retail Sales, 3 & 6 Month T-bill Auction
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