The S&P 500 futures (CME:ESU14) opened sharply lower Thursday off the 8:30 open, down 23 handles from the overnight high of 1968.25, and then rallied over 19 handles before reversing back down in the late afternoon trade.
One trader on the CME floor said, “The comments that the Fed raising rates soon and the health of a major Portuguese lender spooked the S&P in the early goings.” After closing above 17,000 for the first time last week, the Dow was down over 180 points after the open but ended down only 74 points in a wild day of ups and downs.
S&P down 3 of last 4
MrTopStep has been big on following the up and down days. The S&P (SNP:^GSPC) will have occasional down days but actual losing streaks are hard to come by. One-day losses are seldom, two-day declines rare and as we have said, there have been no 3-day declines since January.
While the E-mini has closed down 3 of the last 4 sessions (July 7 -6.6, July 8 -10.6, July 9 +6.6, July 10 -9.4) the S&P continues to hold above 1950.00. Additionally, the S&P 500’s long stretch of relatively quiet trading has worked in favor of the upside; the index has gone 58 consecutive trading days without a 1% move in either direction, which is the longest streak since 1995.
Despite this week’s selloff, investors do not seem to be saying “Get me out,” and we don’t expect them to say it anytime soon.
The Asian markets closed mostly higher overnight and in Europe 9 of 12 markets are higher. This morning’s economic schedule starts with Philadelphia Fed President Charles Plosser moderating on entrepreneurial issues at the Rocky Mountain Economic Summit in Jackson Hole, Wyo., Treasury Budget and earnings from Fastenal (NASDAQ:FAST), Infosys (NYSE:INFY), and Wells Fargo (NYSE:WFC).
Which news to trade?
You may have noticed that our focus lately has been technical—net changes, price levels, volume and order flow. We still watch the news, but lately it’s almost like there’s too much news to know which event to trade off of. No one event like Ukraine or ISIS is dominating.
Germany’s success in the World Cup has renewed the idea of post-WWII Germany as a resurgent power. They are close to getting half their energy from solar and renewables, for example, while the U.S. is drilling and fracking away. And they just expelled our CIA chief, because of a spying program started by President Bush, which President Obama was only recently informed of by his own CIA director. Jokes about ticking off the Germans aside, this is hardly the time for the U.S. to be hurting its relationship with Europe’s biggest economy.
The question for traders, however, is: how does all of that stuff help you decide whether to buy or sell? It doesn’t. When in doubt, follow the trend, keep your stops tight, and take profits sooner rather than holding on.
Our view
The markets constantly teach us lessons, but the one learned by a lot of folks yesterday was never sell a down open. As long as rates are at zero and the PPT is around, you can forget about selling weakness like that. Let’s face it, the S&P is NOT ready to roll over yet. Will it eventually? Sure it will, about 3 months before the Fed jacks borrowing rates.
The first real chance of a rate hike is in early 2015. Three months before that would be around October. Now, we’re not calling a date or even a month for the correction, but it is worth noting that Black Monday of 1987, the mini-crashes of ‘89, ’92, ’97, and ’02 and the crash of 2007 all happened in October. That’s nothing to rest a prediction on, but if we do get an October Surprise, don’t be surprised.
We remain bullish overall, despite being down 15 points from last week’s high. Watch for a “Late Friday Rip” this afternoon. Buy weakness and look for stocks to recover more ground on the upside.
The Psychology Of The S&P Futures And Today’s Sharply Lower Open
S&P Whipsaw
As always, please make sure to use protective stops when trading futures…
- In Asia, 8 of 11 markets closed lower: Shanghai Comp. +0.24%, Hang Seng -0.02%, Nikkei -0.43%.
- In Europe, 9 of 12 markets are trading higher: STOXX 50 +0.62, DAX +0.4%, FTSE +0.23%
- Morning headline: “S&P Futures Down 3 of the last 4 sessions ”
- Fair value: S&P -6.08, NASDAQ -6.49, Dow -70.84
- Economic calendar: Philadelphia Fed President Charles Plosser moderates on entrepreneurial issues at the Rocky Mountain Economic Summit in Jackson Hole, Wyo., Chicago Fed President Charles Evans and Atlanta Fed President Dennis Lockhart on panel at Rocky Mountain Economic Summit in Jackson Hole. Treasury budget and earnings from Fastenal, Infosys, and Wells Fargo.
- E-mini S&P 500 1968.00+9.50 - +0.49%
- Crude 102.15+0.02 - +0.02%
- Shanghai Composite 0.00N/A - N/A
- Hang Seng 23233.449-5.541 - -0.02%
- Nikkei 225 15164.04-52.43 - -0.34%
- DAX 9666.34+7.21 - +0.07%
- FTSE 100 6690.17+17.80 - +0.27%
- Euro 1.3608
