Yesterday, after grinding sideways to higher on Globex, the S&P 500 futures (ESU17:CME) opened the 8:30 am CST cash session at 2464.75, up 4.75 handles, and printed an early high of 2467.00 just after 9:00am CT. Going into the Euro close, the ES fell down to 2458.25, down 6.5 handles below the open, and 8.75 handles from the high of day.
From there, the benchmark futures rallied into the midday pushing up to a high of 2469.00 early in the final hour, completing a 10 handle rule as the range for the day was 10.75 handles. The ES then proceeded to sell off in the final hour, below the open and back down to 2464.00, before settling the day at 2466.00, up 6.00 handles on volume of an impressive 1.5 million minis for a quiet day, and a final MOC of $540 million to buy.
After the spook that came with Sunday night’s gap lower, and then Tuesday’s selling down to 2445.50, the S&P 500 seems to be leveling off. Many times when this market is weak early in the week, it gains traction and rallies late in the week, and with yesterday’s back and fill higher, it seems now ready to push back above 2470, fill the gap around 2474, and target last week’s 2479.75 high. Without any significant reports on the calendar going into the end of the week, it could make this scenario easier to play out.
However, brewing in the Caribbean is Hurricane Irma, due to make landfall in the mainland U.S. in the days to come, that looks to sideswipe the eastern coastline. But with the relatively muted market response to the devastation in Houston, and the lackluster market concern with North Korea now, if this market sells off, it will likely be more seasonal than event driven.
Typical September Pattern: Late-Month Breakdown
From Stock Traders Almanac:
Over the last 21 years the market’s performance in September has been turbulent. DJIA recorded back-to-back losses in 2001 and 2002 of 11.1% and 12.4% respectively, but DJIA was up 7.7% in 2010. Average losses range from 0.06% by NASDAQ to a 0.69% decline by DJIA. Based upon the above chart September typically begins well and all five indexes generally trade choppily higher until around the 15th trading day of the month. From this point until the month closes, DJIA, S&P 500, NASDAQ, Russell 1000 and 2000 give back any early-month gains and drift into the red.
While You Were Sleeping
Overnight, equity markets in Asia traded mostly higher, led by the KOSPI Index, which closed up +1.14%. In Europe, most majors are also trading higher this morning, with the DAX taking the lead at +0.96%.
In the U.S., the S&P 500 futures opened last night’s globex session at 2464.00, and was immediately met with selling, taking the ES down to 2457.50 in the first minute of trading. The futures have since recovered, and eventually made its way up 2467.25, extending the overnight range to just under 10 handles. As of 6:40am CT, the last print in the ES is 2465.00, down -0.25 handles, with 168k contracts traded.
In Asia, 7 out of 11 markets closed higher (Shanghai -0.56%), and in Europe 11 out of 12 markets are trading higher this morning (FTSE +0.52%).
Today’s economic calendar includes Weekly Bill Settlement, Jobless Claims, Productivity and Costs, Bloomberg Consumer Comfort Index, Quarterly Services Survey, EIA Natural Gas Report, EIA Petroleum Status Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 52-Week Bill Announcement, a 3-Yr Note Announcement, a 10-Yr Note Announcement, a 30-Yr Bond Announcement, Loretta Mester Speaks, Treasury STRIPS, Fed Balance Sheet, Money Supply, William Dudley Speaks. Raphael Bostic Speaks, and Esther George Speaks.
Our View
The weekly pivot is at 2460.08 this week. There has been some tug of war on both sides of that level, but I think the bulls have won out. We lean toward continuing to buy dips today and tomorrow above that level, while we are looking for the gap fill from Friday’s close to fill at 2473.75, and then possibly last week’s high of 2479.75 to trade.
If this market breaks back below the weekly pivot, then we are not interested in buying a failing market late in the week, and will look to sell small rallies below 2460.00 while looking for Tuesday’s 2445.50 low.
PitBull: CLV OSC 17/-9 TURNS DOWN ON A CLOSE BELOW 46.59; ESU OSC 17/0 TURNS UP ON A CLOSE ABOVE 2491.49; VIX OSC -2/-4 TURNS DOWN ON A CLOSE BELOW 8.93.