Why is it that we don’t get it? When there is bad news and the S&P sells off, everyone starts calling for a crash, but the reality of this is that most sell offs only last one day, and the S&P starts going back up the next day. This pattern has been set in stone, and if you are trading futures and you’re not buying into it, you just end up part of the buy stops that ‘feed the algos’.
The other part of yesterdays rally was this week’s Jackson Hole symposium. The chances of the fed raising rates has decreased significantly over the last few months, and it’s very unlikely there will be any more rate hikes in 2017. The last part of this is when Dennis Gartman staked his reputation saying that “The Bull Market Has Come To An End.”
Upside Rocket Ship
After Monday’s futures close, going into to the Globex session, the ES started moving higher. On yesterday’s 8:30am CT open, the S&P 500 futures printed 2433.25, up 5.25 handles, and then started to take off as the Nasdaq 100 futures (NQU17:CME) rallied all the way up to 5875.50 at 11:15 ct. This lifted the ES all they way up to 2448.75. There were literally no pull backs on the way up. If you shorted either market, you had to get out quick, it was a straight line up. It all goes back to what I believe is all tied to historically low interest rates.
After a drop to 5865.25 in the NQ, the ES pulled back to 2445.75. The NQ rallied a little, but the ES marched right back up to its high of the day. The next program looked like it was led by the S&P (ESU17:CME), pushing up to 2448.00, up 18 handles on the day, and not long after, the Nasdaq (NQU17:CME) started to rip higher.
After 2:30, the MiM started to show $266 million to sell, and flipped to $120 million to buy. The NQ traded up to 2482.00 and the ES traded up to 2454.00. In the end it was gigantic non-stop buy program. The S&P 500 futures (ESU17:CME) settled at 2452.75, up +24.75 handles, or +1.00%, the Dow Jones futures (YMU17:CBT) settled at 21886, up +194 points, or +0.88%, and the Nasdaq 100 futures (NQU17:CME) settled at 5878.50, up +84.50 points, or +1.43%.
Yesterday’s trade was a great example of how resilient the markets are. When a lot of ‘so called’ market timers all get bearish at the same time, it shows how quickly sentiment can shift, but it’s also another great example of how historically low rates power the markets. Last Thursday the world was coming to an end, and yesterday the markets are back within shooting distance of their all time highs.
While You Were Sleeping
Overnight, equity markets in Asia traded mixed, while in Europe, most majors are currently trading lower. The falling pound has given way to uncertainty about Great Britains future in the EU.
In the U.S., the S&P 500 futures opened last night’s globex session at 2453.00, and printed the overnight high at 2454.75 in the first hour of trading. Shakiness in Europe spilled over the S&P 500 futures, and the ES spent the rest of the night trading lower. As of 7:00am CT, the ESU is trading on its lows. The last print is 2444.00, down 8.75 handles, with 174k contracts traded.
In Asia, 6 out of 11 markets closed higher (Shanghai -0.08%), and in Europe 11 out of 12 markets are trading lower this morning (FTSE -0.05%).
Today’s economic calendar includes MBA Mortgage Applications, PMI Composite Flash, New Home Sales, EIA Petroleum Status Report, a 2-Yr FRN Note Auction, and Robert Kaplan Speaks.
PitBull : The Markets Close In the Direction They Start Out
Our View: Plain and simple… The bulls took no prisoners yesterday. The markets started out firm, and ended that way. There was no let up. The The Dow Jones Industrial Average added nearly 200 points in its biggest jump since late April. It was just last week that everyone was talking about how the Russell 2000 fell into a bear market. Our view is the same as yesterday, buy the pull backs.
PitBull: CLV osc -2/-3 turns down on a close below 47.99; ESU osc -15/-8 turns down on a close below 2403.32; VIX osc -4/13 turns up on a close above 15.99.
