Weakness in the overseas market followed the weak US equities close yesterday. The PMI release in China, 11th straight month of contraction and Europe continued to indicate weak global growth as US companies dribble in with profit warnings and this mornings initial claims 382k exp 375k add to the list of concerns. However, the equities price action did not follow the past months of a bad economy – is good for the indices as the consolidation trade remains in place following the central banks(s) actions over the last two weeks. There is chatter of further sovereign downgrades as Spain, Greece and Italy remain on the sidelines as the Eurozone headlines have slowed. Next week that should change as the macro calendar picks up overseas. Oh, crude was trading in a tight range following the 8% drop this week.
Midday observation: Regarding the S&P rebalance tomorrow.
Srosen: yep, big one, making a change to the way they calculate the index so a few names have some bigger rebalances than normal, obviously doesn’t affect the index as a whole but reason why some names may act a bit funky today and tomorrow (e.g. why BRKb is outperforming today)
elway: 35 bln notional , it ha s been pre traded for couple months, the basic premise is all shares cross held by stocks like BRK have to have their free float reduced so names like KO, WMT Ecolabs etc all have to have less of a weighting. before a cross share holding was determined as above 10% now 5%. more names affected due to this.
Late trade of note: SPX huge print just went up the trade created $1bln (yes 1bln) of SPX notional deltas for sale off the back of it (mkt took it VERY well) SPX in the mkt 13,500 of the Dec 1450 puts were BOUGHT
Thursday started with 317k ESZ and 2k SPZ traded on Globex, trading range 1445.25 – 1454.00 / Wednesday’s pit range 1451.70-1459.20, settled at 1453.20 up .3 handles. Mike_V (08:36:28): there is 2x top potential today at 1453/54 as it is the daily / 3 day pivot lockstep price magnet potential. Today’s RTH’s gapped 6 handles lower to 1447.00 – 1447.50 on signs of equity weakness across the board. Weakness in the financials lead the spoos to 1443.80 low before a recovery up to 1448.50 at 9:15CT. The DJT were down 100 points after NSC warned and the contracting economic data. Crude was trading just above $92, down slightly and the bonds were up nearly a point. The Philly Fed showed -1.9 exp -4.0, 5th consecutive negative report. Short covering and buy programs lift the spoos to 1451.00 at 9:40 followed by 1452.20 high by 10:03CT, heading into the European close. william_blount (9:36:52): BEARS NEED TO REASSERT CONTROL BEFORE 10:05CT and they could be in real trouble above 1453 and that time –real trouble. After printing 1452.20 high the sideways grind set in, holding 1448.50, then posting a new high of 1452.50 at 11:05 and holding in the upper end of the days range. After a few handle sell off the SPZ got hit by a small buy program that pushed the future backup to a retest of the high and then retreated back down to the 1450.50 area. After a little back and fill the SPZ made a new high of 1453.00 at 1:30, then1453.50, just a half a handle off the 1354.00 overnight GLOBEX high. Going into the closing imbalance 1455.00 HOD traded. At 2:45 18 of the Dow 30 were to buy and the broader market showed SELL $190mil. On the 3:00 cash close the SPZ traded 1453.70, settled at 1453.80 up .6 handles on the day.
MTS video: Top Notch