The S&P 500 futures (ESU17:CME) were on a roll Monday night. The ESU gapped open 10 handles lower, and sold off all the way down to 2421.00 after North Korea shot a missile over Japan. The ES then short covered up to 2433.50 before trading 2427.00 on the 8:30 CT futures open. From there, the futures sold off 3 ticks down to 2426.25, and then rallied straight up to 2436.00, completing a MrTopStep 10 handle rule in the first 30 minutes.
We think the early rally had a lot to do with the 415,000 ES’s that traded on Globex. Too many people sold at low prices and put in buy stops, and the initial move out of the gate was squeezing out the weak shorts.
After a small pullback, the ES went flying back up, trading all the way 2440.50. After a few more small pullbacks, the ES traded all the way up to 2444.00 right around 12:00 CT, down 0.25 handles, and 23 handles off its overnight low. Clearly, the ES takes bad news, and makes good out of it.
After eeking out a new high at 2444.74, the ES did another little pull back, and then started going bid again. Going into 2:00 CT, the ES traded up to a new high at 2446.75, 25.75 handles off its 2421.00 Globex low. The ES made another new high at 2448.50 as the MiM went from $110 million to sell to $200 million for sale. Total volume at 2:30 was 1.36 million, that’s not that much considering that 415,000 traded on globex, and the size of the rally. The ES pulled back to 2446.00 as the MiM went to over $500 million for sale, and the actual NYSE MOC came out a net sell of $533 million.
While You Were Sleeping
Overnight, equity markets in Asia and Europe traded higher, as investors have seemingly put the North Korean threat out of their minds.
In the U.S., the S&P 500 futures opened last night’s globex session at 2446.50, and printed the low at 2445.25 in the first few minutes of trading. After that, the ES made a move up to 2454.25, but has since backed off, and is now trading on the lower end of the range. As of 6:45am CT, the last print in the ES is 2447.25, up +0.25 handles, with 127k contracts traded.
In Asia, 8 out of 11 markets closed higher (Shanghai -0.07%), and in Europe 10 out of 12 markets are trading higher this morning (FTSE +0.35%).
Today’s economic calendar includes MBA Mortgage Applications (7:00 AM ET), ADP Employment Report (8:15 AM ET), GDP (8:30 AM ET), Corporate Profits (8:30 AM ET), Fed Gov. Jerome Powell Speaks (9:15 AM ET), EIA Petroleum Status Report (10:30 AM ET), Farm Prices (3:00 PM ET).
Our View
I’ve said for a long time now: “It takes days and weeks to knock the S&P 500 futures down, and only one day to bring them back up.” That’s what yesterday was all about, as a little lighter news opened the floodgates to risk off behavior.
After the run up overnight, it feels like maybe the S&P’s have run up too fast too soon. The month of August has a series of lower highs, which is not good going into a seasonally weak period, but bears have not followed through by creating a series of lower lows.
This market is bending, and it will eventually break, but until then, we remain bullish. The daily pivot today is at 2440.50, and we are looking to be buyers of a morning dip above that price.
