So, how high is high in the S&P? Unlike many, we have been in the S&P futures since 1985 and have been there for every major stock market event from the ‘87 crash to the credit crisis. We were there during Gulf War 1 and we were there for Gulf War 2, we were there for the tech bubble and we just got back from Dubai a few days before 9-11 and we were there for the flash crash, and we have fought for customers the whole time. So we know what the phrase “how high is high” means.
In good and bad times we have stayed with the S&P, but somehow the S&P has not gotten back to where it was when it made its all-time intraday high at 1552.87 from more than 12 years ago. Some things in life are hard to forget, and the 2000 dot-com bubble would be one of those times. On March 24, 2000, the S&P cash traded up to its all-time high and then went on to lose 50% of its value during the two-year bear market that ensued. In the bear market of 2002 the Dow sold off under 800 and made an intraday low of 768 on Oct. 10, 2002. The S&P stayed below its 2000 all-time high for 7 years, until on May 30, 2007, it set its first new all-time high at 1530.23 and reached its all time high at 1556.14 on Oct. 9, 2007. The market were trying to move higher just as the credit crisis started. Few people caught on as quickly as the Pit Bull did. While reading the tape is much harder to do today, he was and still is one of the top tape readers in the world. A tireless worker, he would trade all day and chart 500 stocks at night. At the onset of the credit crisis he would say things like “there is rotten wood floating around in the financials” and tell me that the market leaders, the banks and brokerage stocks, were falling apart. He told me in early 2007 that there was going to be an enormous shift of wealth out of the United States and says today he has no idea how this is going to end.
Earlier, 1998-1999 was the year of the day trade. Every Tom, Dick and Harry was an internet stock trader. Kids wearing shorts to work were buying and selling tech names that most did not even know what the company made. Buying stocks for $20 and $30 and selling them for $100 or $200 only days later. Literally, kids making hundreds of thousands of dollars with absolutely no experience in trading the markets. They were smart to jump on the bandwagon, but when the music stopped the ending was about something they thought they would never hear: liquidation. There is an old saying we have learned and it’s called “get in, get out, never fall in love with your position.” Back then the day traders only knew one side of the trade — buy.
So here we are back at the old highs and less than 100 handles off the S&P’s all-time highs. Bonds have sold off and Europe and the U.S. are busy printing new money. The presidential cycles favor the incumbent and it looks like it’s all clear sailing from here. As the stock market approaches multi-year highs, there is no cheering or confetti. And while the stock market is enjoying a big-time upside party, the term “fiscal cliff” is going to replace the words “ECB” and “Fed” soon.
Mutual Fund Monday
Monday July 9 S&P -2.6 handles
Monday July 16 S&P -4.3 handles
Monday July 23 S&P -14.5 handles
Monday July 30 S&P -2 handles
Monday Aug 6 S&P +.90 handles
Monday Aug 13 S&P +.10 handles
Monday Aug 20 S&P -.50 handles
Monday Aug 27 S&P -1.5 handles
Monday Sept 10 S&P -11.8 handles
Monday Sept 17 ????????
7 out of the last 9 Mondays have been down.
MrTopStep Closing Print Video: http://www.mrtopstep.com/videos/
Our view:
The only economic number out today is the Empire State manufacturing survey. Mutual Fund Monday has turned into a train wreck with 7 out of the last 9 being down. I am sure if we went back further the stat would get worse. That said, the S&P has gone a long way and has yet to really buckle. We do not know when this is going to change. However, we lean to looking for a spot to sell the early rally, then look to buy weakness. As always, keep an eye on the 10-handle rule and please make sure to use stops when trading futures.
- It’s 5:30 a.m. and the ESU is down 2.25 handles at 1456.75, crude is down 19 cents at 98.97 and the EC is at 1.3122, down 6.
- In Asia 7 out of 10 markets closed higher (Shanghai Comp. -2.14%, Hang Seng +0.14%).
- In Europe 9 out of 12 markets are trading modestly lower.
- Today’s headline: “US Stock Futures Decline After S&P Rally.”
- Economic calendar: Today: Empire state mfg survey. TUESDAY: Fed’s Evans speaks, current account, Treasury int’l capital, housing market index, Fed’s Lacker speaks, Ford Fusion launch; earnings from FedEx. WEDNESDAY: Weekly mortgage apps, housing starts, existing home sales, oil inventories; earnings from AutoZone, General Mills, Adobe Systems, Bed Bath & Beyond. THURSDAY: Jobless claims, Philadelphia Fed survey, leading indicators, Fed’s Kocherlakota speaks; earnings from CarMax, ConAgra, Rite Aid, Oracle. FRIDAY: Quadruple witching, Fed’s Lockhart speaks, iPhone 5 shipping date.
- 2012 net changes: Dow + 11.26% YTD, NASDAQ +22.22% YTD, S&P 500 +16.55% TYD, Russell 2000 +16.71% YTD, VIX -37.99%.
- FAIR VALUE: S&P -2.50, NASDAQ -1.00
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Crude tops $100 in the premarket as prices at the pump in downtown Chicago have been above $4.50 a gallon and are now threatening $5.00, premium is $5.25. There has been and now continues to be plenty of renewed chatter regarding the release of the Strategic Petroleum Reserves – of course in a nonpolitical way…as consumers will be paying a hefty price over the coming months just to fetch their marked up necessities. Sorry, I must be showing my age. The past generations, even sharing the verbal thought of a sitting administration or the nonpartisan FOMC dramatically changing any type of policy leading up to an election was unheard of and would be heavily condoned. Actually, it just was not done. What is it that the politicos know – that we don’t?
Midmorning observation: Over the next couple of days the markets will need to digest the recent moves as the books square up and the next trend develops. Aside from the price action during the coming days, the volume will help to determine the conviction of the traders and the coming direction. At this point, it is hard to imagine a deep back and fill in the equities. Last night, while being torched by Green Bay Packers I was sent an email regarding simple mea culpa that was sent following Bernanke’s presser. It was from a money manager closing out about 15 positions for his customers. Capitulation, no mas – for many who know better than to fight the Fed – in this case, the Central Bankers who are fighting the crisis. The following has been posted here on and off since early September and may be reposted again as we close out the 3rd quarter and the money managers prepare to send out their own quarterly statements. “Pain trade,” a number of fund managers missed out on the summer rally and as a result are lagging the broader indices. The longer prices stay at present levels, the greater the impetus for managers to “chase” stocks will become. This could cause a virtuous cycle whereby higher prices beget higher prices. *WSJ = 2007 http://on.wsj.com/Opy8hQ
CFTC says the net EUR short position is now USD 15bln, a decrease of 7% from the previous week, smallest since April 3rd (More …) – Net JPY long position USD 5.3bln, increase of 38% – Net AUD long position USD 7.1bln, increase of 12% – Net USD short position USD 7bln, was previously a USD short position
Egan-Jones downgrade of US reminds investors of a longer-term risk for bonds. Egan-Jones is a small rating firm compared to the big three — Moody’s, S&P and Fitch. The question is whether these big players will downgrade US in coming year. S&P already cut US to AA plus last year — which ironically pushed investors into Treasury bonds and the dollar on safe-haven demand. Moody’s has warned this week that it may strip US off the highest credit rating if lawmakers don’t reach an agreement to fix the country’s fiscal woes. If Moody’s cuts US, Treasury bonds might get hit this time if the downgrade reduces investors’ confidence to hold dollar-denominated assets. The potential pain will be on US consumers with higher interest rates. The 10-year note is recently 1 point lower in price to yield 1.868%. USD/JPY up more than 1.15% at 78.36.
Friday started with 388 ESZ and 2.3k SPZ traded on Globex, trading range 1458.50 – 1449.50 / Thursday’s pit range 1456.80 – 1428.50, settled at 1450.40 up 17.8 handles. Today’s RTH’s December contract gapped 5 handles higher to 1455.00 – 1456.00 marking the early low. The equities were stepping higher in the opening minutes, mts2 (08:43:21): XLF Oct 17 calls 250,000 getting BOUGHT right now in the mkt created 5.5mln to buy off the print someone is getting long 425mln notional of XLF on this trade paid 12c. The next set of buy stops and programs came in following the release of the upbeat University of Michigan sentiment 79.2 vs exp of 74.0 and helped to propel the spoos thru 1461/63 area as the SPZ printed 1467.50 HOD by 9:25CT. HLCAMP1 (09:12:31): Normal Program BUYING High = 1465.00 EUBIE (09:12:37): +965 tics @ 1464.50 that’s it? HLCAMP1 (09:12:45): watch your SPY volume closely / u never know Eub. when retail and funds run out of cash… Eub average holding period on ETF’s and stocks is 14 days on the winners and 1.5 days on the losers and the average holding period in the spoos is 55 minutes HLCAMP1 (09:32:31): you can sell em Eub. these guys (his favorite program traders) just bought….From 9:30ishCT the spoos lost their the bid, slowly and quietly faded back to 1457 area as the sideways market set in and those that could – left for the day…During the midday session the spoos traded in a tight range hovering just shy of 1460 until Jimmy_Osbiston (14:20:24): Egan Jones cuts US to AA- This comes following a warning earlier in the week from the agency they would downgrade their rating of the US if the Fed announced further easing measures. The spoos traded a LOD 1454.70, the closing imbalance showed 26 of the Dow 30 to sell decent size and the broader market showed a large $1.2Bil to sell and up go the futures… On the 3:00 cash close the SPZ traded 1459.00 before settling at 1459.00 up 8.6 handles.
MTS Charts: “BONDS TO EQUITIES WIDEST SINCE MARCH! $SPZ 1465 $SPY $148 / $TLT $118″ http://tinyurl.com/8jduzje
Interesting article: http://seekingalpha.com/article/867361-there-s-no-longer-a-bernanke-put
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CONTRIBUTORS’ CORNER
SPX CHARTS
Richard Chappell, Channels & Patterns
We won’t be seeing a straight spike into infinity however, there will be advances and declines within the overall trend, and I think we are are most likely close to a short term decline now. On the daily SPX chart we saw the second spike yesterday well over the upper bollinger band. The advance is therefore very stretched now, and we are likely to see SPX back within the daily bollinger bands within two or three days. We are also now close to main rising channel resistance from the June low on SPX in the 1470 area and I would expect significant resistance there:
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DISCLAIMER: The information and data in the following report(s) were obtained from sources considered reliable. Opinions, market data, and recommendations are subject to change at any time. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any commodities or securities. MrTopStep, its officers, directors and its contributors may. in the normal course of business, have position(s) which may or may not agree with the opinions expressed in this report.
