Monday’s S&P 500 index (SNP:^GSPC) trade ended up being a slow “bump and grind” higher after last Thursday and Friday’s 2.6% gain. At 2:20 CT the S&P was up 0.12%, the Dow was down -0.06% and the Nasdaq Composite was up 0.49%.
Apple & Yelp
The S&P fluctuated in a narrow trading range yesterday after last week’s largest gain of the year and in front of Janet Yellen‘s first report on monetary policy.
Apple Inc (AAPL) was in the news as activist trader Carl Icahn pushed away from his idea to increase share repurchases. And Yelp Inc (YELP) rallied 2.5% when Yahoo said it was going to use its reviews to add context to its search results.
These were only a few stocks that added to yesterday’s slow grind. At the beginning of the day it was apparent that last week’s late rally was going to be hard to compete with. With a lack of economic news in both the U.S. and Europe it was, as they say, a slow news day.
Fed-dom
Today starts with Federal Reserve Chair Janet Yellen’s monetary policy testimony release. Next up is Philadelphia Federal Reserve Bank President Charles Plosser’s speech on economic outlook in Newark, Del.
Yellen will deliver her first semi-annual monetary policy testimony before the House Financial Services Committee in Washington at 10 a.m. ET, which is then followed up by Richmond Federal Reserve Bank President Jeffrey Lacker speech on financial stability at Stanford University and last but not least, Richard Fisher speaking at 8:10 PM ET.
Where from here? Up, probably
The big question is, was the last decline like all the rest? Was it just a big false start? We do not know for sure but we know that the big 42- and 44-handle down days broke most of the old patterns.
Is it enough to reverse the current bull market we are in? It’s hard to say; with the Fed still buying $65 billion a month in bonds, evidently the the answer is no, at least until the next Fed meeting and taper. With the uncertainty of the markets and Janet Yellen stepping in at least for now the S&P looks higher.
The Asian markets closed higher across the board and in Europe 11 of 11 markets are trading higher. Today’s economic and earnings schedule starts with NIFB Small Business Optimism Index, Federal Reserve Chair Janet Yellen’s monetary policy testimony released, Redbook, Philadelphia Federal Reserve Bank President Charles Plosser speech on economic outlook in Newark, Del., JOLTS, Yellen’s first semi-annual monetary policy testimony before House Financial Services Committee in Washington, wholesale trade, 4-week T-bill auction, 3-year note auction, Richmond Federal Reserve Bank President Jeffrey Lacker speech on financial stability at Stanford University, Dallas Fed President Richard Fisher speaks and earnings from CVS Caremark (CVS), Intercontinental Exchange Group Inc (ICE) Sprint (S), Pacific Gas & Electric (PCG) and Fossil (FOSL) and TripAdvisor (TRIP) after the close.
Our view
Despite all the economic releases, earnings and Fed speak, I don’t think it’s going to pick up much today unless the S&P sells off. After doing 2.5 to 3 million contracts (CME:ESH14) a day, volume slipped to 1.1 million contracts yesterday.
Right now the big accounts are stunned; they all sold and they are all covering or stuck. They could not have all gotten out over the last 3 days.
Our view is to keep it simple; the S&P has seen a big up and down move and it’s tired. I do not expect to see any 30- or 40-handle ranges right now. And the longer the S&P holds, the more the bears will dry up and blow away.
Our view is to sell the early rally and buy weakness, keeping in mind that the S&P is up 62.5 handles in 4 days.
As always, keep an eye on the 10-handle rule and please use protective stops when trading futures and options.
- In Asia, 11 of 11 markets closed higher: Shanghai Comp.+0.84%, Hang Seng +1.78%, Nikkei +1.77%
- In Europe 11 of 11 markets are trading higher: DAX +1.25%, FTSE +0.84%
- Morning headline: “S&P Futures Above 1800 on Yellen’s First Day of Work”
- Total volume: LOW 1.14Mil ESH14 and 10K SPH14 contracts traded
- S&P Fair Value: 1795.19, futures 1800.75, 5.56 higher at 8:04 AM ET
- Economic calendar: NIFB Small Business Optimism Index, Federal Reserve Chair Janet Yellen’s monetary policy testimony released, Redbook, Philadelphia Federal Reserve Bank President Charles Plosser speech on economic outlook in Newark, Del., JOLTS, Yellen’s House testimony, wholesale trade, 4-week T-bill auction, 3-year note auction, Richmond Fed President Jeffrey Lacker speech on financial stability at Stanford University, Dallas Fed President Richard Fisher speaks.
- E-mini S&P 500 1817.00+3.50 - +0.19%
- Crude 98.55-0.22 - -0.22%
- Shanghai Composite 0.00N/A - N/A
- Hang Seng 22297.09+334.109 - +1.52%
- Nikkei 225 14800.06+81.72 - +0.56%
- DAX 9478.77+188.909 - +2.03%
- FTSE 100 6635.17+43.62 - +0.66%
- Euro 1.363
