SPX Futures Recap

Post FOMC Flunk-a-dunk

Overnight, the S&P 500 futures drifted sideways to lower, making a low of 1982.25 late in the globex session. As the regular trading hours opened in the U.S., the index futures drifted back and forth between unchanged territory without any momentum taking hold. At the 1:00 Central time Fed announcement, it was revealed that the FOMC governors will delay raising interest rates for at least another meeting, as the vote was sharply in favor of the current stance by a vote of 9 to 1, with the Richmond Fed governor Jeffrey Lacker being the lone dissenter.

The initial reaction in the futures were lower as the ESZ5 traded down to the 1976 area, before bouncing more than 35 handles up to 2012. Shortly before 1:30 central time, we noted that the MIM was showing over $1 billion to sell early; and almost immediately the S&P futures took a nose-dive back down to the 1972 area before finding support there and going on to close at 1975 just 3 handles from the low of day. What can we say? Banks and analysts seemed to be divided going into the meeting on what the product would be, but it seemed that more were predicting further delay in the raising of interest rates; and, late in the morning, the WSJ’s Hilsenrath, who has been known to have perhaps the closest ear to the Fed, said that based personalities and body language that he had observed, there would, in his perception, be no rate hike announced today.

The equity markets acted undetermined. No one wanted to hold the high or offer the low; and the indexes ended up closing about right where they opened. The price action following the FOMC announcement is likely indicative of the mindset of many people. Does a rate hike or delay equal higher or lower prices?

Heading into tomorrow we conclude the week with September’s quad-witching, which has closed higher in 13 of the last 19 years. However, Fridays have not been very kind to the index, having closed down 11 of the 16 occasions; and over the last five years, the two days following FOMC day have performed moderately weak. However, aside from unexpected selling tomorrow, the S&P 500 seems poised to close the second week higher – something that the market has not done since spring.

One final note – the last two years, equity markets have made a high for the month on September 19, and proceeded to end the month lower and trade weaker into October. This coincides with the pattern this year for index futures to make a monthly high the week of expiration and trade lower into month’s close.

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