Yesterday, after the early rally on Globex, the S&P 500 futures (ESU17:CME) traded up to 2471.40 just after the 8:30 futures open. From there, the ES dropped below the vwap, down to 2465.50, made a lower high at 2470.50, pulled back below the vwap again, and then rallied back up to 2471.00. The ES did not act all that great, Oracle (NYSE:ORCL) was weak, and that seemed to be putting pressure on the Nasdaq 100 futures (NQU17:CME).
At 9:50 the ES sold off down to new lows at 2462.25, traded up a few handles, then got hit by a 10:30 CT sell program that pulled the futures down to 2460.75. During the next sell program, the ES traded down to 2453.50, rallied up to 2456.75, and then came crashing down to 2448.75 as North Korea warned the U.S. of ‘gift packages’. I find it amazing that the Chinese and Russians have not stepped in, but maybe they just want to sit back and watch. There was a story floating around that the reason the VIX rallied and the ES sold off wasn’t just because of North Korea’s gift package warning, but that some big Wall Street trading desks were passing around a “worst case” scenario analysis. A military confrontation with North Korea now appears almost inevitable should North Korea launch its ICBM.
The ES made its low for the day at 2445.50, at 12:15 CT, and by 1:45 had rallied all the way up to 2458.50. Going into 2:00, the MiM started to show over $400 million to buy, and the ES pulled back down to 2451.75 before rallying back up to 2455.50. Lets face it, the markets got spooked, and in came the sell programs. After making the high the ES sold back to 2453.75, just as the 2:45 cash imbalance came out showing $390 million to buy, and then started going back up heading into the 3:00 cash close, and then up to 2460.50 on the 3:15 futures close.
As hurricane Irma heads north, the big question is, will it hit south Florida or head to the west coast and inflict more damage to already water soaked New Orleans and Texas? It’s a funny thing, some people do not believe in climate change or global warming, but when over 50 inches of rain falls in Texas, and two more hurricanes are on track to hit the U.S., it’s hard to believe that ‘something’ isn’t changing.
Entire ice shelves are cracking off, and the oceans are warming. I am not a weatherman, but you don’t have to be see the effects. As Irma makes it way to Puerto Rico and Cuba, there is little doubt that it will hit Florida. The question is, how bad will it be? If you live in Florida, I suggest you turn off the weather channel. Do not keep looking at it, and start preparing. I am not saying not to keep up with the latest news, what I am saying is, do not look at it all day. It’s time to start getting ready for what could be a terrible situation. The link above is from the Miami Herald. I sure hope things do not end up like it did 25 years ago.
http://www.miamiherald.com/news/weather/hurricane/article32006499.html
While You Were Sleeping
Overnight, equity markets in Asia and Europe traded mostly lower, following suit with yesterday’s weakness in U.S. stocks.
In the U.S., the S&P 500 futures opened last night’s globex session at 2460.25, and had printed the overnight low of 2456.50 by 7:30pm CT. Since then, the ES has been trading sideways in a 6.5 handle range, and has retested both the high and low multiple times. As of 7:00am CT, the last print in the ES is 2462.75, up +3.25 handles, with 160k contracts traded.
In Asia, 6 out of 11 markets closed lower (Shanghai +0.05%), and in Europe 9 out of 12 markets are trading lower this morning (FTSE -0.52%).
Today’s economic calendar includes MBA Mortgage Applications, International Trade, Redbook, PMI Services Index, ISM Non-Mfg Index, and Beige Book.
VIX Jumps 21%
Our View: I am not sure what to say. Things are scary around here, with hurricane Irma and North Korea topping the list. September is starting on very shaky ground. They say the category 5 winds are the strongest ever recorded in the Atlantic ocean. Insurance companies were among the biggest losses for the financials sector Tuesday. Our view is that while the ES may rally further, there is a lot of uncertainty ‘floating around’, and we all know how the S&P hates uncertainty. We will keep it at that!
PitBull: CLV OSC 7/-11 TURNS DOWN ON A CLOSE BELOW 46.75; ESU OSC 20/-3 TURNS UP ON A CLOSE ABOVE 2480.64; VIX OSC -7/-2 TURNS DOWN ON A CLOSE BELOW 9.98.
