The S&P 500 closed lower yesterday for the first time in seven trading days, losing 4.16 or -0.22%. The Dow Jones Industrials fell 12.72 points or-0.08% and the NASDAQ Composite lost 34.49 points, or -0.83%.
Several times during yesterday’s early selloff I told the MrTopStep trading room that while the S&P may sell off a bit I didn’t get the feel that it would be very broad. It was clear that despite that “minor” selloff there was little to no volume attached to the decline. In fact, total volume including Globex pre-market volume was 998,000 contracts traded or “less than 1 mil,” a common trader’s benchmark. It’s a rarity to see volume that low, but in the new world trading order that seems to be the way the game is worked. When the S&P sells off hard the volumes return but once the E-mini [CME:ESM14] starts going back up the volume disappears.
Yesterday it was clear to see that some of the big name stocks like Dow Chemical Company (NYSE:DOW), which closed up +0.90% after it reported a 65% gain in first quarter profits, or Boeing Company (NYSE:BA), which closed up 2.4% after the company beat core earning forecasts and ended up the best “gainer” in the Dow, were major drivers. But it wasn’t just those two names that kept the markets together. It was the big-name earnings like Facebook and and Google, that reported after the close, which led to a big push higher for the S&P in the aftermarket.
I have said many times that I am not here to supply you levels. I am here to provide you with a feeling, and that feeling is telling me the S&P is on its way to S&P 1900. Despite the Fed cutting back on its quantitative easing / bond buying program, the S&P closed less than 1.2% from its all-time contract high of 1897.28. As I said to the Pit Bull yesterday, there is no place for investors to go but stocks.
The Asian markets closed mixed overnight and in Europe 10 of 13 markets are trading higher. Today’s economic and earnings calendar includes durable goods orders, jobless claims, EIA natural gas report, Kansas City Fed Manufacturing Index, 7-year note auction , Fed balance sheet and money supply, and earnings from General Motors Company (NYSE:GM), Eli Lilly and Company (NYSE:LLY), Astrazeneca Plc (AZN), American Airlines Group (AAL.O), United Continental Holdings Inc (NYSE:UAL), Raytheon Company (NYSE:RTN), Starwood Hotels & Resorts Worldwide (NYSE:HOT), JetBlue Airways Corporation (NASDAQ:JBLU), Dunkin Brands Group Inc (NASDAQ:DNKN) and Novartis N (NYSE:NVS) pre-market. Starbucks Corporation (NASDAQ:SBUX), Visa Inc (NYSE:V) and Baidu Inc (NASDAQ:BIDU) report later in the day.
Our view
It’s my feeling that, based on the low volume and overall price action of the S&P, it wants to continue higher. At 2:30AM, when I wrote the first draft of today’s View, the E-mini [CME:ESM14] was up 7 bucks at 1880.00. Our call is you can sell the rallies and buy weakness or you can just wait for the S&P to pull back and buy it. There are several areas of stops from 1879.00 to 1884.00 and above 1886.00 all the way up to 1896.00. As always, please keep an eye on the 10-handle rule and please use stops when trading futures and options. Given the ranges we’ve seen the past week, 10-handle moves in either direction (1870 or 1890) are a distinct possibility.
- In Asia, 6 of 11 markets closed higher: Shanghai Comp. -0.50%, Hang Seng +0.24%, Nikkei -0.97%.
- In Europe, 9 of 12 markets are trading higher: DAX +0.83%, FTSE +0.70%
- Morning headline: “Europe stocks, S&P futures up on positive earnings reports”
- S&P Fair Value: -6.23
- Total volume: LOW 1.00M ESM and 3.2K SPM traded
- Economic calendar: Durable goods orders, jobless claims, EIA natural gas report, Kansas City Fed Manufacturing Index, 7-year note auction , Fed balance sheet and money supply. Pre-market earnings from General Motors, Eli Lilly, AstraZeneca, American Airlines, United Continental, Raytheon, Starwood Hotels, JetBlue, Dunkin Brands, and Novartis. Starbucks, Visa, and Baidu report later in the day.