ES 06-15 (15 Min)  3_30_2015

 

It has not been easy for the S&P this year. After the first 55 trading days in 2015 the S&P is struggling as it heads into the end of the first quarter 2015 rebalance. So far it’s seen nothing but selling. Every day last week there was a net sell imbalance on the close of the NYSE. We started warning people of the potential selling and just like clockwork the big mutual and investment funds have been dumping both the winning and losing stocks.

After another weak close on Thursday, the S&P 500 futures sold off on Globex in the overnight session, making a low at 2041.00, but the futures opened above at the 2047.00 to 2047.50 level and started going up immediately after the 8:30 CT bell rang.

The trade fit one of MrTopStep’s favorite trading rules for Fridays called Countertrend Friday. This occurs when the futures sell off overnight and are trading lower before the 8:30 open. What happens is, the retail sellers can’t hold the futures over the weekend so they put in buy stops just above the market. Once futures open, the bargain hunters show up and the S&P starts to short cover, forcing the premium levels between the S&P cash in the S&P futures to widen out to buy program levels.

With buy stops above the market and the algorithmic programs there to help with the push, the ESM15 traded up to the VWAP, where it hesitated. When I saw this price action I jumped on the headset and spoke to the traders in the MrTopStep Trading Room of a pattern that I thought they should look for. I explained that the opening push was a good indication of how the day could end up and to pay attention to buying above, at, and below the VWAP. All day long the ESM15 would rally and then pull back to the VWAP, exactly where I said the buyers would show up, just above, on and below the VWAP. Had you bought into those dips you would have made money on every trade.

In the end it’s all about recognizing patterns. Although the algorithmic programs do almost anything they like, they do end up sending messages about the overall price action of the S&P. If you can see it, detect it, then you more than likely can trade it.

In Asia 9 out of 11 markets closed higher (Shanghai Comp. +2.59%) and at 6:00 CT in Europe 10 of 12 markets are trading higher. We have a big week ahead starting with the final 2 trading days of the first quarter, 25 separate economic releases, 10 T-bill or T-bond auctions or announcements, 8 Fed presidents speaking and the March jobs report. Today’s eco calendar includes Personal Income and Outlays, Pending Home Sales, Dallas Fed Mfg Survey, Farm Prices and Stanley Fisher speaking.

Our view: MOC selling every day last week. Long before CNBC started talking about the end of the first quarter I was warning people. Again, I said we would get past the quad witch and that the next big thing would be end of the first quarter. This selling has kneecapped the S&P over the last two weeks. No matter how you look at it the selling continues. That said, the S&P 500 futures look like they’re trying to hold the 2050.00 level. What we don’t know is how much more selling is left going into the final 2 trading days of March. It’s my guess the mutual funds continue to sell into the end of the month but then start putting that money back to work on the first trading days of April. We lean to selling the rallies and buying weakness.

“The S&P and a Quiet Day of Chop”


As always, please use protective buy and sell stops when trading futures and options.

  • In Asia 9 out of 11 markets closed higher: Shanghai Comp +2.59%, Hang Seng +1.52%, Nikkei +0.65%
  • In Europe 11 of 12 markets are trading higher: DAX +1.41%, FTSE +0.39%, MICEX +1.67%, Athens GD.AT -0.26% (at 6:30 CT)
  • Fair value: S&P -8.21 , Nasdaq -9.15 , Dow -93.14
  • Total volume: 1.15mil ESM and 4.5k SPH traded
  • Economic schedule: Personal Income and Outlays, Pending Home Sales, Dallas Fed Mfg Survey, Farm Prices and Stanley Fisher speaks.

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