Yesterday’s rally started with Hong Kong stocks posting their best day in more than a year. Better than expected earnings from the airlines and automakers helped push the Dow Jones to its 44th new high of the year, as treasury yields and the dollar traded to their highest since July. There is no doubt about it, the higher the markets go, the less volume there is.
Whats up with the S&P 500 futures? It keeps keeps going higher, and the ranges are getting smaller. No one wants to buy it though, everyone I talk to keeps trying to sell it. At 12:00 CT the total range in the S&P 500 futures (ESZ17:CME) was only 3.5 handles. Yesterday may have possibly been one of the tightest non-holiday ranges ever. I have seen price action in the past like this, but in the last few months there has been some extreme examples.
Going forward a little, at 1:15 there were only 520,000 ES traded, of which 110,000 came from the Monday nights Globex session. That means only 410,000 ES futures had traded, and if algorithmic and high frequency trading (lets be nice) make up 50% of that, it means only 205,000 futures had traded by humans in the day session. I know they say that the bots make up 70% to 80% of the volume, but it’s hard to believe even they can operate in such a low volume, narrow trading range environment.
Around 1:40 CT the ES took out its 2529.50 Globex and high for the day and traded up to 2530.75, while the Nasdaq 100 futures (NQZ17:CME) were down ticking, and the early MiM came out showing $450 mil to buy.
When I spoke to the PitBull, he said he was amazed how the markets act, that they never pull back. He went on to say that Europe has done exactly what the U.S. did with all the quantitative easing, that they have been ‘printing money like mad’. For the last few years, I have been saying the reason the markets keep going up is because of negative, or historically low rates, and i still think that is the driving force. Even if the fed hikes rates in December, and does three or four hikes in 2018, I do not think things will change that much.
At 2:30 the MiM was showing buy $288 million, and the ES shot up to 2532.50, but didn’t pull back at all when the MiM / MOC flipped to $100 million to sell. It’s been an amazing run, and you know what? It’s not over. In the end the S&P 500 futures (ESZ17:CME) settled at 2532.75, up +6.50 handles, or +0.25%, the Dow Jones futures (YMZ17:CBT) settled at 22608, up +101 points, or +0.45%, the Nasdaq 100 futures (NQZ17:CME) settled at 5998.00, up +17.50 points, or +0.29% and the Russell 2000 (RTYZ17:CME) settled at 1516.60, up +3.10 points or +0.20% on the day.
The mistakes people make when it comes to trading is that they end up selling because they are not long, and that has been a major problem for most futures traders, and as much as I hate to say it, that includes me. It’s the old ‘up too high to buy’ theory, or ‘I didn’t buy the dip so I’ll sell into it.’ Very stupid way to go.
While You Were Sleeping
Overnight, equity markets in Asia traded mostly higher, with the Hang Seng index once again leading the way at +0.73%. Meanwhile, in Europe, most major markets are trading lower this morning, with the CAC currently trading down -0.39%.
In the U.S., the S&P 500 futures opened last night’s globex session at 2533.00, and immediately printed the overnight high at 2533.25. From there, it was another slow night, with the ES being held to just a 3.25 handle range. As of 7:00 am CT, the last print in the ES is 2531.00, down -1.75 handles, with 92k contracts traded.
In Asia, 8 out of 11 markets closed higher (Shanghai +0.29%), and in Europe 10 out of 12 markets are trading lower this morning (FTSE -0.09%).
Today’s economic includes MBA Mortgage Applications (7:00 a.m. ET), ADP Employment Report (8:15 a.m. ET), PMI Services Index (9:45 a.m. ET) ISM Non-Manufacturing Index (10:00 a.m. ET), EIA Petroleum Status Report (10:30 a.m. ET); Fedspeak — James Bullard Speaks (3:00 p.m. ET), Janet Yellen Speaks (3:15 p.m. ET); Earnings –PepsiCo (NYSE:PEP) (6:00 a.m. ET), Monsanto (NYSE:MON) (8:00 a.m. ET).
Our View
Most can’t believe it, but like the old saying goes; seeing is believing. The S&P 500 futures traded up to 2533.25 yesterday. While the markets continue higher, there is a huge lack of volume. It really is hard to believe. That said, I do think the S&P is nearing a short term top. I do not think it can keep going up without some type of pull back. The ES is up 5 days in a row. Can it go 7 or 8? I guess it can, but something tells me you have to be careful, a shakeout is coming but it’s not going to crash or anything like that.
Market Vitals for Wednesday 10-04-2017
