In the world of international cat-and-mouse, the Russians seem to have the world on the run. While the S&P 500 [CME:SPH14] has sold off over the last few days, the overall sell pressure tied to China’s weak economy is not really slowing the U.S. major indices.
Net Changes
The S&P managed to pull off a pre-close rally that left the E-mini [CME:ESH14] in positive territory for the first time in 3 trading days and only 0.50% off its March 7 contract high. While the S&P traded mostly in the red for most of the day, the selloffs were short-lived. At the end of the day the S&P closed fractionally higher, up 0.1%. The Dow Jones Industrial Average closed up 11 points or 0.1%, 1.4% off its Dec. 31 contract high and the Nasdaq Composite closed up 16 points or up 0.4%.
Asia and Europe started out weak, but after the S&P’s early selloff traders began to short cover. Floor trader Matt Johnson said “It was slow , we really didn’t see any new buying throughout the day until the imbalance showed up over $400mil to buy.”
Global Concerns
While China may weigh down on the S&P, the Russian move into Crimea also continues to affect the market. The continued buildup of both military hardware and personnel indicates Russia will annex Crimea and possibly other parts of Ukraine. The G7 nations issued a joint statement yesterday warning of consequences and calling such a move a violation of international law.
Russia maintains the push is to protect its Russian-speaking population, but the reality is it’s not the Ukrainians attacking their ethnic Russian-speaking minority; it’s the other way around. The G7 continues to urge the Russians to return to their bases ahead of Sunday’s referendum, but barring some miracle agreement that seems highly unlikely.
The Russian / Ukrainian situation remains very fluid and this weekend’s vote is already a foregone conclusion. The question is will the world be able to do anything about it?
The Asian major markets closed modestly lower higher and in Europe is trading modestly lower. On today’s economic calendar are jobless claims, retail sales, import-export prices, business iInventories, EIA natural gas report, 30-year bond auction, Treasury budget, Fed balance sheet and money supply.
Our View
Today the June contracts trade in the front-month configuration. The roll has begun, but the open interest in the big S&P is down to 200,000 and added 15,000 contracts yesterday. In its heyday the big S&P’s open interest was over 650,000 contracts. The roll that used to take a full month now takes 2 or 3 days. This will have an effect on trading.
The big S&P futures contract is not what will be affecting the index; it’s the E-mini, which has over 3 million open interest. As traders concentrate on rolling positions they tend to pull back from the daily trading. Remember, the roll isn’t just the S&P; it’s the Russell 2000, Mid-Cap and Nasdaq too. When you add up all the open interest you will understand why the roll has a slowing effect.
The S&P firmed yesterday and were were pointing it out pretty much all day. Again, after another round of sell programs the ESH14 rallied, but this time when it pulled back it rallied again. We lean to selling rallies and buying weakness with the idea that the S&P may be trying to go back up again. President Obama is trying to make a diplomatic push to defuse the crisis in Ukraine; maybe that will help the markets. As always, please keep an eye on the 10-handle rule and please use stops when trading futures.
- In Asia, 7 of 11 markets closed higher: Shanghai Comp. +1.07%, Hang Seng -0.67%, Nikkei -0.10%
- In Europe 2 of 11 markets are trading lower: DAX +0.15%, FTSE -0.12%
- Morning headline: “S&P 500 Futures Seen Higher Ahead of Retail Sales”
- Total volume: 1.66Mil ESH14 and 5.4k SPH14 contracts traded
- S&P fair value: 1867.9 (futures 3.10 higher at 1871.0 as of 6:49 AM CT)
- Economic calendar: Jobless claims, retail sales, import-export prices, business iInventories, EIA natural gas report, 30-year bond auction, Treasury budget, Fed balance sheet and money supply.
- E-mini S&P 5001846.75+0.25 - +0.01%
- Crude98.55-0.22 - -0.22%
- Shanghai Composite0.00N/A - N/A
- Hang Seng21508.381-247.699 - -1.14%
- Nikkei 22514327.66-488.32 - -3.30%
- DAX9017.79-170.90 - -1.86%
- FTSE 1006553.78-67.12 - -1.01%
- Euro1.3858
