When it comes to trading the S&P 500 futures, it seems like there are fewer moving parts than there were a few weeks ago. Remember how Greece was going to cause a global financial collapse, and the China stock market bubble was about to burst? In addition to two big global negatives, the VIX was flashing red lights of caution that the correction was upon us. Or that is what they said on TV.
Yesterday’s pre-8:30 Globex volume dropped to 75,000 contracts, that’s down from over 400,000 just two weeks ago. The CBOE’s fear gauge (VIX) fell to a new low at 11.79. Where did the volume and the fear go? Below is a look at the last two weeks of net changes and total volume in the ESU15.
Look What Happened to the S&P after the 4th of July weekend : 11 day chart of the ESU15
Monday July 6 ESU15 -4.2 handles, Volume 1.97mil
Tuesday July 7 ESU15 +9.10 handles, Volume 2.53mil
Wednesday July 8 ESU15 – 34.50 handles, Volume 2.38mil
Tuesdays July 9 ESU15 +2.0 handles, Volume 1.98mil
Friday July 10 ESU15 +27.8 handles, Volume 1.57mil
Monday July 13 ESU15 +25.40 handles, Volume 1.33mil
Tuesday July 14 ESU15 +7.70 handles, Volume 954k
Wednesday July 15 ESU15 +2.10 handles, Volume 1.14mil
Thursday July 16 ESU15 +12.70 handles, Volume 1mil
Friday July 17 ESU15 +1.9 handles, Volume 890k
Monday July 20 ESU15 +3.0 handles, Volume 937k
Look how the volume dropped as the S&P rallied. Go line by line and read it out loud. The lower the volume, the higher the S&P went.
Up until yesterday, the S&P 500 futures (ESU15:CME) had closed higher 7 days in a row. It’s been an incredible turnaround, but the Nasdaq futures (NQU15:CME) made its third straight record high close. Everything looks great, right? Well…not everything. One of the PitBull’s key indicators, the QCHA, was weak all day.
03:51:04 PITBULL: DBOY DON’T MESS WITH QCHA -85
This means, that even though the S&P’s rallied, there was selling going on in stocks under the surface. Morgan Stanley, which was up over $1.00, closed down -0.40%. Commodities across the board were weak; gold fell to a 5-year low, and crude oil broke $50.00’s.
While the S&P looks great, it’s also overbought and over extended. So far there has not been much of a pull back, but as the week wears on, we think there is a good possibility we see some lower prices. That’s just my gut feel, but after being up 7 in a row, something has to give….
In Asia, 9 out of 11 markets closed higher , and in Europe 9 out of 12 markets are trading modestly higher this morning. Today economic calendar includes the Redbook and earnings from AAPL, VZ, MSFT, YHOO, GPRO, HOG, UTX, CMG, BHI, ISRG, AMTD, RF, LXK, TRV, DOV, SBNY, ILMN, OMC, SAP, FTI, FITB, IRBT, VMW, PKG, and PNR.
PERFECT STORM
Our View: Let’s stick to the facts. For the month, the S&P is up +3.2%, the Dow is up +2.7%, and the Nasdaq is up a whopping +4.65%. After making sure everyone should expect weak earnings, the 67 companies in the S&P that have reported second-quarter earnings are on track to slip -3.2% from a year ago, better than the -4.5% decline forecast by analysts heading into the reporting season. It really has been a perfect storm to the upside. Our view is to start selling the rallies after closing up 8 days in a row, the S&P is way overdue for a pull back, and at least a few down days.
As always, please use protective buy and sell stops when trading futures and options.
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In Asia 9 of 11 markets closed higher : Shanghai Comp. +0.64%, Hang Seng +0.52%, Nikkei +0.93%
- In Europe 9 out of 12 markets are trading higher : DAX +0.10%, FTSE +0.14%, CAC +0.15%, MICEX +0.31%, GD.AT CLOSED at 6:00 am CT
- Fair Value: S&P -6.94 , NASDAQ -8.97, Dow -83.05
- Total Volume: LOW 937k mil ESU and 1.6k SPU traded
- Economic calendar: Redbook.
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