It’s 12:15 CT and the S&P 500 futures are trading 2206.75, up 3.25 handles, or + 0.17%. Crude oil futures just traded up to $49.50, up over 9%. Everything is moving. Gold trades down to 1171.30 down, -1.50%, the dollar index trade up 1% to 101.88, and the bonds traded down to 150.06. There is a lot going on in the markets, the end of the November, the beginning of December, The December fed meeting, the holidays, the end of the year, the beginning of the new year and the inauguration of Donald Trump as the 45th President of the United States.
$3.5 Billion Sold on the Close Last 3 Sessions of November
On Monday the CLF7 traded down to $45.14 before bouncing up to $47.65 on Monday’s close. Then on Tuesday, the oil futures took a dive down to $44.82 and traded near $45.50 for much of yesterday’s overnight session. There was a rally up to $49.98 after OPEC ‘finally’ agreed on some production freezes, and then oil smoked higher from there. The funny thing is, the S&P didn’t go for the ride… I could not pinpoint it, but there was some type of rotation; buy crude / sell S&P and Nasdaq. Why not? With the S&P sitting at new all time highs, some of the big investment firms are selling into it. Will it last? I don’t know, but I am getting the feeling that Friday’s jobs report will not come in as high as expected.
Yesterday, the S&P’s opened at 2211.25, up 7.75 handles, and printed a new all time high at 2213.00 before rolling over and selling off for much of the morning. Once again, a low was made on the close at 2197.25, that’s a 15.75 handle turn around, as volume near 2 million contracts. The MOC was strong to sell for the third consecutive day, hitting 1.4 billion, which accumulates to over $3.5 billion sold over the course of this week.
We said that with this week’s calendar, the Fed meeting in two weeks, OPEC, and Italian referendum, that higher volume would show up and lead to lower prices. It finally looks like a top heavy equities market is at least trying to give some back. The 2210 resistance area failed once again, and the floor at 2200 failed on the close, leaving the 2191.50 technical area as key for bulls to hold. With Asia up and Europe down, the markets seems to be repricing in front of Sunday night’s Italian referendum.
Read more about the Italian referendum here.
While we can’t rule out another rally, we do think the overall price action is ‘weakening.’ The December Fed meeting starts December 12th, and while it’s almost two weeks away, there is a strong possibility that there will also be some selling in front of the meeting. Yes, the Christmas holiday is upon us, but remember, the Santa Clause rally doesn’t come until the final week of the year.
Dow up 5.4% in November
Overnight stock markets in Asia rallied sharply, but when Europe opened, equities began to sell off. The ESZ, which had traded up to a 2201.75 high early in the Asian session, dropped down to 2194.25 early into the Euro open. After a small bounce, the ES is now trading at 2196.75, down 2 handles on the session, with total volume coming in at 127k as of 6:43 am cst. Today is the first day of the month, and once we get past the NFP and the Italian referendum, this 3.5 billion that has escaped the market this week could be put back to work on mutual fund Monday.
Going into today’s session, 2200 and 2191.50 are key levels we will be watching, as bulls need to push back above 2200 and at least close there. A successful retest of 2191.50 could lead to that. Meanwhile, bears need a push to 2191.50, and then fail there, which should lead to 2186.00.
In Asia, 10 out of 11 markets closed higher (Nikkei +1.12%), and in Europe 7 out of 11 markets are trading lower this morning (FTSE -1.27%). Today’s economic calendar includes Motor Vehicle Sales, Weekly Bill Settlement, Chain Store Sales, Challenger Job-Cut Report, Jobless Claims, Gallup Good Jobs Rate, Loretta Mester Speaks, Robert Kaplan Speaks, PMI Manufacturing Index, Bloomberg Consumer Comfort Index, ISM Mfg Index, Construction Spending, EIA Natural Gas Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 52-Week Bill Announcement, Fed Balance Sheet, and Money Supply.
PitBull: The S&P Rallies Early in the Day and Early in the Week
Our View: The ESZ has been stuck in a 20 handle range for two weeks. My gut still tells be that the rallies will fail. Today’s economic calendar is the busiest of the week. Whether the numbers are good or bad, we lean to selling the rallies. You can take it from there. November was a big month for equities. The Dow rose 5.4% in November, and is only 29 points off its record high. The S&P 500 rose 3.4%, the Nasdaq Composite rose 2.6%, and the Russell 2000 rose 11%.
As always, please use protective buy and sell stops when trading futures and options.