After 11 consecutive higher closes in a row the S&P finally pulled back on the 12th day. The futures were already wavering but after a few headlines:
- BREAKING: US warning on new threat of overseas flights and
- *IMF SAYS GLOBAL GROWTH UNEVEN, FRAGILE AS DOWNSIDE RISKS REMAIN
The S&P (SNP:^GSPC) finally gave way to the downside. We are not going to do a big blow-by-blow of the day’s trade. When “everyone” thought the S&P would trade back down after yesterday’s rally after the open, the S&P did what it does best; it rallied 11 handles up to 1844.50. As we have said many times, this is a game of buy and sell stops and yesterday’s trade was a perfect example of that. In Asia 9 out of 11 markets closed lower with the Nikkei down -2.15%, and in Europe 11 out of 11 markets are trading lower. Today’s economic schedule starts with the Consumer Price Index, jobless claims, PMI manufacturing, Philadelphia Fed survey, leading indicators, EIA natural gas report, EIA petroleum status report, Fed balance sheet, money supply and pre-market earnings from Accor, (ACT), Cap Gemini, (CBB), (DAN), (DNR), (DTV), Henkel, (HRL), (HSNI), (LXK), (LXP), Puma, (SONS), (TWI), (WLK), (WLT), (WMT), (ZLC). Thursday post close: (ARUN), (CENX), (COG), (COMM), (ESRX), (GRPN), (ENV), (HPQ), (INTU), (JWN), (MDRX), (MHK), (MRVL), (NEM), (PCLN), (PRA), (PSA), (QLIK), (WAGE), (WBMD).
Our View
The big 11-handle rip after yesterday’s down open shows that before the ESH14 goes back down it has to run every short out first. We already know you can’t sell a big down open like that, but how far the S&P has to go before it reverses is anyone’s guess. With the E-mini S&P (CME:ESH14) just 2 handles off its all-time high it looked like new highs were on tap. Then the headline out of the IMF sent an already over-extended S&P into a small downside tailspin. The only thing we can say is the day’s trade was a stunning example of how easy it is to run stops up and down all day long. Our view is, with the S&P cash study showing today as being up 15 / down 15 of the last 30 occasions and Friday’s stats showing the S&P cash up 13/ down 17 of the last 30, we lean to selling rallies. That does not mean you can’t play both sides; it just means we think the S&P has got further to go on the downside. As always, keep an eye on the 10-handle rule and please use protective stops when trading futures and options.
- In Asia, 9 of 11 markets closed lower: Shanghai Comp.-0.18%, Hang Seng -1.19%, Nikkei -2.15%
- In Europe 11 of 11 markets are trading lower: DAX -1.07%, FTSE -0.28%
- Morning headline: “US Stocks Seen Lower Ahead of Wal-Mart Earnings and Key US Data”
- Total volume: 1.76Mil ESH14 and 8.4K SPH14 contracts traded
- S&P Fair Value: 1825.7 (futures 5.45 below at 1820.25 as of 7:54 AM ET)
- Economic calendar: Consumer Price Index, jobless claims, PMI manufacturing, Philadelphia Fed survey, leading indicators, EIA natural gas report, EIA petroleum status report, Fed balance sheet, money supply
- E-mini S&P 5001841.75+5.50 - +0.30%
- Crude98.55-0.22 - -0.22%
- Shanghai Composite0.00N/A - N/A
- Hang Seng22467.33+73.25 - +0.33%
- Nikkei 22514881.47+432.29 - +2.99%
- DAX9618.85-41.20 - -0.43%
- FTSE 1006812.99+16.28 - +0.24%
- Euro1.3717
