Yen Up, Dollar Down
It didn’t seem like it at first, but when Japan added 130 billion to to quantitative easing programs overnight, it was actually sending a negative signal. The yen rallied, the dollar sold off and crude oil sold off hard.
At 9:30 CT when the crude oil inventories (API) were released, crude oil futures (CLU16:NYM ) were trading around the $40.64 level, at 10:41 CT the futures had dropped all the way down to $39.38. Prior to that the ESU16 made an early high at 2171 on Globex and sold off all the way down to and early low of 2145.00. The futures proceeded to rally up to 2150.50, sold off again, retesting the earlier low, and put in a new low at 2141.50. After the retest the ESU16 traded back up to 2153.25, a lower high, as crude oil meandered lower.
Over the last several weeks, it didn’t matter to the S&P when crude oil was selling off, it did yesterday though.
At 11:45 CT the S&P 500 futures (ESU16:CME) were down -0.76%, the Dow futures (YMU16:CBT) were down -0.57%, and the Nasdaq futures (NQU16:CME) are off -0.98%.
The PitBull sent me this just as a 12:00 sell program hit the ES:
12:54:37 PITBULL: feels like they want to puke again. The next move was down to new lows at 2143.25 a few minutes later and the eventual low at 2041.50.
Gold Up, Crude Down
Everything was moving yesterday. There was economic and earnings news, and weakness in Asia spilling into Europe. Along with the flunk in equity futures, the US Dollar futures index tanked. The dollar index has seen strong outflows for several days now, along with crude oil which is now down 20% from the May highs, which places that market back in bear market status. Meanwhile, gold futures (GCZ6:CMX) have seemed to be building a higher base, and traded up to 1374 yesterday, just $3 from the July highs.
Overnight global equity markets continued to be offered lower. The S&P 500 futures traded sideways to lower throughout the Globex session making a 2153 high on the session open. That high was touched again early in the Asian session and traded lower from there. The ES is currently trading at 2148.00, down 4 handles on the session, with volume hitting over 150K at 6:15 am cst.
The 2152-2155 area showed up as support for much of the last couple weeks, and it looks like after breaking through that yesterday, this former support area is being converted into resistance. The late day bounced stopped there, then the globex highs were unable to overcome this level, and now the spoos are trading lower. For MrTopStep, this 2155 area becomes the pivotal level, and if unable to re-acquire this price early in today’s session, then it looks like the 2120 price may be reached by NFP.
Pretty Heavy Calendar
Today’s calendar includes more noise than earlier this week. With volume showing up yesterday, today could be another pivotal day. We warned that once August got underway there could be some money outflows. Once we got past the first day of the month it’s looking like some of this is coming to place. Remember last August? The money started flowing out slowly like a drip and the index behaved poorly until the bottom fell out. The PitBull also noted many years when the market was making a high in late July and then led to a sell off in August.
At the end of the day, I am not saying the pullback will be any further significant than to 2120, but heading into the seasonal trade we must be aware, especially as the S&P had it’s worse day since the post Brexit fall out on June 26. For now, it’s still a dip buyers market, and believe me, I am not forgetting it. The index futures are still less than 2% from all time highs, but it was telling how the highs last month were made in Globex with no real participation in the cash session.
In Asia, 10 out of 11 markets closed lower (Nikkei -1.88%), and in Europe 9 out of 12 markets are trading lower this morning (DAX -0.06%). Today’s economic calendar includes the Bank Reserve Settlement, MBA Mortgage Applications, ADP Employment Report, Gallup U.S. Job Creation Index, Treasury Refunding Announcement, a 3-Yr Note Announcement, a 10-Yr Note Announcement, a 30-Yr Bond Announcement, PMI Services Index, ISM Non-Mfg Index, and the EIA Petroleum Status Report.
Turn'em Down Tuesday
Our View: Things got a little more difficult for the Bulls yesterday. After 3 solid weeks of trading in a narrow range, the index markets finally given way to the downside. Is that a bad thing? I don’t think so, but it was long overdue. Is there more downside coming? It’s quite possible. I know I partially gave up on my next 40 handles being down from 2160, but all the sideways to up price action seemed to indicate some back and fill price action. That said, I think today we could see higher prices . Our view is to buy weakness with tight sell stops.