The S&P futures have closed higher 4 in a row, up 5 of the last 6 or up 11 out of the last 14 sessions. As the stock market heads into the summer trade more traders are starting to talk S&P 2100.00. The S&P is not seeing the big gains it did last year but with the S&P up over 36% in 18 months, we think there is more to come.
Excess Cash
The liquidity provided by the Fed bond buying programs combined with zero rates has been a main driver of higher asset prices. As the taper continues and stocks keep going up it all comes down to rates. With the Fed saying they won’t raise rates until the middle of 2015 that leaves the S&P (CME:SPU14) positioned for further gains.
Some think that rates could start to head higher as inflation builds up and that it could reverse interest rate-friendly places like REITS and bonds but we do not think that’s in the picture right now.
We understand the winter slowdown and the impact on the first quarter and gross domestic product contraction but until the Fed “actually” raise rates it seems a moot point for the markets.
Jobs Friday
The summers are tough: small ranges, low volume and a ton of complacency. We expect the S&P to pull back, we expect it to go back up, we expect the buy stops in the S&P start to build up and when that happens we know the S&P is going back up. It’s almost unbelievable that the overall price action can remain so consistent.
As traders we are trained to follow trends but we are also been trained to look for an end of the trend. The trend we are talking about today is the trend in the job market which continues to create more jobs each month.
While economists expect the economy to expand by 3% in the second quarter we think job growth will continue to carry the stock market and the economy in the second half of 2014.
At 7:30 CT the US employment numbers will be released. According to Bloomberg the consensus for today’s non-farm payroll number is 211,000 with a consensus range of 199.000 to 290,000.
Despite the rough winter and the low GDP number we still think the stock market will continue to charge ahead. Today MrTopStep is looking for a higher non-farm payroll number of 230,000+.
We think the S&P has a good possibility of making its 25th new high for the year. We are just not sure the S&P will hold today’s early gains until the close at 12:15 PM CT.
In Asia 6 out of 11 markets closed higher and in Europe 9 out of 12 markets are trading higher this morning.Today’s economic calendar includes the Challenger Job-Cut Report, June Employment Number, International Trade, Jobless Claims, PMI Services Index, EIA Natural Gas Report, Early Close, Fed Balance Sheet, Monday Supply and earnings from International Speedway (NASDAQ:ISCA).
Our view
In order to get to the 4th of July Holiday we are going to have to get through a deluge of economic reports this morning, not just the jobs number. MrTopStep is looking for a higher-than-expected Non-farm Payroll number of 230,000+.
If that happens and the S&P gaps sharply higher we not only want to sell the open but we also think it could be a short-term top. This would be similar to a Countertrend Friday trade—but it’s not Friday!
A Long Summer Day
CME GROUP CHICAGO TRADING FLOOR HOLIDAY SCHEDULE FOR 2014
Thursday, July 3, 2014
Foreign Exchange, Interest Rates, Commodities, GSCI, Weather & Real Estate close at 12:00 CT (CME commodity options close at 12:02 CT, CBOT Mini Grains close at 12:30 CT) Equities close at 12:15 CTClosed Friday, July 4, 2014
As always, please make sure to use protective stops when trading futures…
- In Asia, 6 of 11 markets closed higher : Shanghai Comp. +0.19% , Hang Seng -0.08%, Nikkei -0.14%.
- In Europe, 9 of 12 markets are trading higher : DAX +0.64% , FTSE +0.48%
- Morning headline: “S&P Futures Seen Higher Ahead of US Jobs Report ”
- Fair Value: S&P -7.39, NASDAQ -7.73, Dow Jones -82.13
- Total volume: 915k ESU and 2.9k SPU traded
- Economic calendar: Challenger Job-Cut Report, June Employment Number, International Trade, Jobless Claims, PMI Services Index, EIA Natural Gas Report, Early Close, Fed Balance Sheet, Monday Supply and earnings from International Speedway (NASDAQ: ISCA).
- 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 23531.439-18.18 - -0.08%
- Nikkei 225 15348.29-21.68 - -0.14%
- DAX 9979.44+68.171 - +0.69%
- FTSE 100 6851.24+34.87 - +0.51%
- Euro1.365
