There was an uptick in job creation and a sell-off in the S&P 500 futures on Friday. After going out weak at the end of January the mutual funds bought cash on the close five out of five days last week and their presence was felt. From last week’s low at 1973.75 to Friday’s high the S&P futures (ESH15:CME ) gained 95 handles or nearly five percent. Both indices were within one percent of their all-time highs set in December. After falling 3.2% in January the S&P 500 went out weak on the last trading day of the month but closed higher 4 out of 5 days last week.
During Friday’s trade the S&P 500 rose as much as +0.5% after the government’s report showed the U.S. added more jobs than forecast in January, capping the biggest three-month gain in 17 years. Workers’ earnings jumped as well. The early rally pushed the S&P 500 up 3.9% on the month and erased the 3.2% decline that happened in the middle of January. It’s been a tough two weeks for traders and we don’t think its going to get easier anytime soon.
VIX
As traders we have to go with the ups and down but it’s been so volatile. One of the big trades that has gone on all year is the asset allocation that started in the beginning of January where the big investment firms and mutual funds bought bonds and sold S&Ps.
With the recent surge in the stock market and five straight days of buy imbalances it looks like that trade has dried up. If that’s the case then the S&P is probably going back up. The VIX fell more than 17% last week after rising 26% two weeks ago. On Friday the VIX closed 2.6% higher at 17.29.
S&P 500 Earnings
So far 322 companies in the S&P have reported. S&P earnings last quarter are projected to have grown 4.1%, with revenue gaining 1.4%. That’s up from 2.4% and 0.8% at the beginning of the year. About 77% of the gauge’s companies that have posted earnings this season have beaten analyst estimates, while 56% have topped sales projections. Analysts once again painted a dreary earnings season forecast and so far that has not been the case.
In Asia 7 out of 11 markets closed lower and in Europe this morning 6 of 12 markets are trading higher. Next week has a total of 13 economic reports, 9 T-bill or T-bond Auctions or Announcement’s, 1 Federal Reserve Bank President speaking and a slew of earnings. Monday’s trade starts with no economic reports. Earnings are due from Hasbro (NASDAQ:HAS), CNA Financial (NYSE:CNA), Computer Sciences (NYSE:CSC), and Molina Healthcare (NYSE:MOH).
Our view: Forget looking at the all of this year’s net changes and just look at the last 7 days:
- Jan 27 -23.6
- Jan 30 -30.1
- Feb 2 +28.7
- Feb 3 +25.0
- Feb 4 -12.0
- Feb 5 +25.0
- Feb 6 -20.0
I don’t care what anyone says, this is nuts. Even on the days it’s slow, pulling off a 30-handle range is no big deal. So far this year Mutual Fund Monday has seen mixed results this year: 2 up, 2 down, and 1 closed. Based on the year close I suspect the S&P 500 will be lower in Globex and trade down initially after the 8:30 open. Our view is to sell the early rallies and buy weakness.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 of 11 markets closed lower : Shanghai Comp. +0.62%, Hang Seng -0.64%, Nikkei %
- Earlier in Europe 6 of 12 markets were trading higher : DAX -0.54%, FTSE -0.18%, MICEX +3.55%, Athens GD.AT -1.97%
- Fair Value : S&P-4.79 , Nasdaq -3.99 , Dow -59.40
- Total Volume: 1.7mil ESH and 4.2k SPH traded
- Economic schedule: Next week has a total of 13 economic reports, 9 T-bill or T-bond Auctions or Announcement’s, 1 Federal Reserve Bank President speaking and a slew of earnings. Mondays trade starts with no economic reports and earnings from Hasbro Inc. (NASDAQ: HAS), CNA Financial Corporation (NYSE: CNA), Computer Sciences Corporation (NYSE: CSC), and Molina Healthcare, Inc. (NYSE: MOH).
- E-mini S&P 500 2042.75-12.25 - -0.60%
- Crude Oil 56.50+2.39 - +4.42%
- Shanghai Composite 0.00N/A - N/A
- Hang Seng 24521.00-158.391 - -0.64%
- Nikkei17711.93+63.43 - +0.36%
- {{172|DAX}}10846.39-59.021 - -0.54%
- FTSE 100 6853.44-12.49 - -0.18%
- EUR/USD 1.1323
