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ES Bad News Is Good News / Fed Makes 5th Rate Hike In Two Years

Published 12/15/2017, 01:37 AM
Updated 05/14/2017, 06:45 AM

More Rate Hikes To Come

  • Dow Industrials And S&P Hit New Highs After Fed Rate Increase
  • U.S. Dollar Drops After Fed Raises Rates
  • OPEC Oil Output Falls to Six-Month Low
  • Fed Raises Rates, Sticks to Forecast for 2018 Increases
  • Yield On 10-year U.S. Treasury Note Rose For aA Fourth Consecutive Session

The day started out with with Hong Kong’s Hang Seng closing +1.5% from a push in the banking sector, and the Stoxx Europe 600 closing flat. In the U.S., the dollar sank, and the S&P 500 futures sold off down to 2659.25 after Democrat Doug Jones won the Alabama Senate race, but rallied to new all time highs before the 8:30 CT futures open. Total overnight Globex volume was 325,000 contracts. This is the world we live in. The S&P gets hit by what the markets consider ‘bad news’, and rally.

After opening at 2670.50, the ES rallied up to a new all time contract high at 2674.50, and then had a small drop down to 2671.50 after the NQ pulled back. After another small pullback the ES double topped at 2675.00. The Alabama election news, the drop, and the new all time highs were enough to keep the ES went quiet in front of the fed’s interest rate hike announcement.

After the 2670.50 high, the ES sold back off under the vwap down to 2670.00, and then stutter stepped down to 2667.50 around 12:45. When the rate hike was announced, the ES went flying back up to 2673.75 in a matter of seconds. After another drop under the vwap, the ES traded back up to retest the high of the day at 2675.00. At 2:00 the MiM came out showing $188 million to buy, and by 2:42 had flipped to $516 million for sale (MOC selling has been going on for three weeks). As the MiM flipped the ES sold back off under the vwap down to 2669.25. At 2:45 the actual MOC came in NYSE sell $230 million. Going into the 3:00 cash close the ES traded down to 2666.25 and then went on to close at 2669.25 at 3:15.

Most of the days volume and trade came after the fed rate hike and Yellens press conference. We don’t think anything was said that wasn’t expect, but the late sell off was out of character with how the markets usually close firm. That said, it was not a kill job, but there was a late day reversal. In the end, the S&P 500 futures (ESH18:CME) settled at 2669.00, up +1.25 handles, or +0.04%; the Dow Jones futures (YMH18:CBT) settled at 24,646, up +103 points, or +0.41%; the Nasdaq 100 futures (NQH18:CME) settled at 6417.25, up +14.25 points, or +0.22%; and the Russell 2000 (RTYH18:CME) settled at 1529.00, up +9.40 points or +0.61% on the day.

As always, please use protective buy and sell stops when trading futures and options.

    • In Asia 8 out of 11 markets closed lower: Shanghai Comp -0.29%, Hang Seng -0.19%, Nikkei -0.28%
    • In Europe 10 out of 12 markets are trading lower: CAC -0.25%, DAX -0.65%, FTSE -0.21%
    • Fair Value: S&P +3.16, NASDAQ +22.04, Dow +18.33
    • Total Volume: 1.5m ESH & 7k SPH traded in the pit

by Tim Haefke

Original post

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