The S&P is not giving up much to the downside. While the PitBull and I both agree that the stock market looks tired, we also know that if there is not a move lower soon, all the side ways to lower ‘price action’ will result in another push higher. When I look at my ‘money maker’ charts I see several levels of support just a little lower from here. The first nearby level comes in at 2285-2283, then 2270.00-2268.00, and finally 2264.50-2262.00.
It’s 1:30 ct and the (ESH17:CME) is trading 2287.50. Total trading range is 9.75 handes (which I hate to say, equals the MrTopStep 10 handle rule) with total volume just turned 900,000 contracts. I bought the 2285.50’s and sold 2288.50’s on half, and now I am waiting to see what the guys with the better seats.
However, as the day has now come to a close, the S&P was unable to get back above the open, nor was it able to hold much of a bid over the VWAP. While the MiM opened up showing small for sale at 2:00 pm cst, my call for a “flip” to a positive imbalance worked out, as the MOC came in at $125 million to buy. Price action was unable to follow suite as the S&P has now settled the day at 2285.75, down three ticks on the day, and I am getting stopped out at break even on my runner.
We knew, after last weeks extremely busy economic calendar failed to trend the S&P’s, that this week’s extremely thin calendar would likely be even worse. After two days, the S&P has been in a weekly range of 12 handles, and that includes the ups and downs in globex. What we expected to be a thin-to-win type trade has only carried through on half of that promise, as the S&P has been thin, but not much winning. However, the more time that goes by with sellers are unable to follow through, the more likely it becomes that in a single session the range expands above 2300.
For now, the calendar is looking toward the PitBull’s Thursday/Friday low the week before expiration. Maybe some weakness in the next few days could lead to a buying opportunity that pushes the S&P above 2300.
While You Were Sleeping
Overnight stock markets in Asia and Europe were very mixed. The S&P 500 futures traded down to a 2284.25 low on the open before reversing back up to 2291.25. Since then, the ESH has traded lower, last printing 2287.75, down three ticks on the session, with volume of 89k as of 6:37 am cst.
In Asia, 6 out of 11 markets closed lower (Nikkei +0.51%), and in Europe 6 out of 11 markets are trading higher this morning (DAX +0.10%). Today’s economic calendar includes MBA Mortgage Applications, the EIA Petroleum Status Report, and a 10-Yr Note Auction.
Our View
The PitBull reminded me to start looking for the Thursday / Friday low the week before the February options expiration, which is next week. My gut tells me that after a few days of back and filling, the ES pops back up to ES 2300, or higher. Our view is UNCHANGED, you can sell the early to midday rally and buy weakness, or just go with the trend and buy weakness while continuing to keep an eye on the MTS 10 handle rule.
As always, please use protective buy and sell stops when trading futures and options.