Well, the S&P 500 futures (ESM17:CME) gave you a lot of chances to sell after they traded up to 2353.00 in the early part of the day, but as the odds of Trumps Obamacare revamp continued to drop, so did the stock market.
Friday, after a series of lower lows, the ES traded all the way down to the 2337.00 area going into 2:00 CT, and then down to a new daily low at 2331.75 after 2:15 CT. As we waited for the ‘final vote’ one thing was very clear, the S&P 500 futures were weak. Another thing that’s clear is stocks do not like uncertainty, and the public is becoming increasingly uncertain over Trumps economic agenda.
30 minutes before the vote all eyes were on Capitol Hill. News FLASH: Trump Pulls Health Care Bill Vote. When the announcement was made at 2:36 the (ESM17:CME) was trading 2336.50, 5 handles off its low. From there it rallied 10 handles up to 2331.75, dropped down to 2338.00, rallied back above the VWAP at 2344.00, and settled at 2344.80 on the 3:15 futures close. There were only two ways out of this for the Trump administration; let the vote go down, or abandon the bill.
The S&P fell 1.5%, chalking up its largest weekly loss since November 4, the week before the U.S. presidential election. I asked myself several times in the weeks leading up to Friday’s vote why President Trump was trying to deliver on so many of his campaign promises so fast? He was signing bills on the first day he took over the White House. His immigration bill was shot down, and so has his health care bill. His go fast approach has not worked.
The Dow Jones futures (YMM17:CBT) fell 13 points to 20575, or down 0.3%, leaving the index down -2.5% from its all time high made on March 1. One of the other big concerns overshadowing the S&P is how high valuations have become after an 8 year bull market run. A survey by Bank of America Merrill Lynch (NYSE:BAC) showed that 34% of respondents say equities are ‘overvalued,’ the highest level since starting the survey in 2000. 3 weeks after the Dow hit its last record, 81% of people surveyed now say stocks are overvalued around the globe.
Lets face it, the Trump rally added over $3 trillion in market cap at the 2017 highs. It doesn’t take a genius to know that the markets can’t keep going up like that without a few bumps in the road. The first 65 days of the new administration has now learned how gridlock works. President Trump is also learning it’s hard to run the country like he did his company. Should he have tired to work with the Democrats to fix Obamacare over blowing it up? Should he have delivered his tax cut package first? I think that’s for history to decide.
While You Were Sleeping / Trump Health Care Hangover
Overnight, global equity markets took another dive as all Asian markets closed moderately lower, and in Europe all major markets are currently in the red. The S&P 500 futures gapped lower to open the globex session at 2337.00, 5.75 handles beneath the final print from Friday. A high of 2337.50 was made on the open before pushing down to 2332.50 in the Asian session, and then down to 2317.75 soon after the Euro open, down 27 handles at that point.
Since then the ESM17:CME has traded 10 handles off that low back up to 2327.50, and as of 6:16 am CST, the last print is 2326.25, down 18.50 handles, on volume of 206k.
In Asia, 11 out of 11 markets closed lower (Nikkei -1.44%), and in Europe 10 out of 11 markets are trading lower this morning (DAX -0.76%). The final 5 trading days of March and the first quarter of 2017 has a total of 17 economic reports, 12 Federal Reserve Bank presidents speak and 11 T-bill or T-bond auctions or announcements. Today’s economic calendar includes Dallas Fed Mfg Survey, a 4-Week Bill Announcement, a 3-Month Bill Auction, a 6-Month Bill Auction, a 2-Yr Note Auction, Charles Evans Speaks, and Dennis Kaplan Speaks.
End Of The Quarter Rebalance
Our View: The dollar closed basically unchanged, oil swung between gains and losses, copper pulled back, and treasuries gained. The S&P 500 futures (ESM17:CME) closed up Friday up 4.8 points (handles), and the Nasdaq 100 futures (NQM17:CME) closed up 24.25 points. There is going to be a lot of fed speak this week (12 Federal Reserve banks presidents speak), and also the end of the 1st quarter rebalance. To tell the truth, I’m not sure what to think. It would be my guess that the big institutions buy bonds and sell stocks on the first trading days of the month.
I am not sure the markets will just shake off Friday’s debacle, and if the S&P does rally, I am not sure the rally will hold. Getting bearish? Not really. Getting concerned about how high stocks are and if the Trump rally is over? Yes.
Our view is to sell the early to midday rallies and buy weakness using tight sell stops.
Market Vitals for Monday 03-27-2017
