There’s really no point talking about Tuesday nights Globex session. The ES traded in a 3.5 handle range from 2457.75 to 2461.25 for most of the night, and only 128k contracts traded. That’s it. Moving on…
At 8:30am CT, the S&P 500 futures (ESU17:CME) opened the regular trading session at 2461.50, up +3.75 handles, and the Nasdaq 100 futures (NQU17:CME) opened up at 5898.25, up +15.50 points. Strong earnings from Morgan Stanley (NYSE:MS), and better than expected housing data, helped push stocks higher right out of the gate.
At 9:00am, the ES had printed an early high of 2466.25, and the NQ had traded up to 5913.25. Things slowed down a little after that, and stocks began to back off. By 9:30 the ES had traded down to 2462.25, and the NQ fell to 5896.50. From there, the slow grind higher that we have been seeing for the last couple weeks started, which continued for the rest of the morning and into the afternoon.
When it was all over, the S&P 500 futures (ESU17:CME) settled at 2471.50, up +13.75 handles, or +0.56%, the Dow Jones futures (YMU17:CBT) settled at 21596, up +76 points, or +0.35 %, and the Nasdaq 100 futures (NQU17:CME) settled at 5918.25, up +35.50 points, or +0.60%.
Thin-To-Win Meets New All-Time Highs
At the end of the day, the ES drifted all the way up to 2472.00, and closed at new all time highs. What’s surprising to me is, this happened with less than 950k contracts traded. Going a step further, if you subtract 128k contracts for the Globex session, then another 70% for algo and hft programs, you’re only left with 246,600 contracts traded in the regular day session. That’s what you call ‘Thin-To-Win’, and it has been a big part of this rally over the last 2 weeks.
There’s going to be a lot of heavy data flying around today and tomorrow, but I really don’t expect volume to pick up that much. Summer markets have always been thin, so you can probably expect more of the same today.
Looking past earnings and economic reports for a minute, tomorrow is the July options expiration, and the stats for today are the strongest of the week. The Thursday before the July expiration has the S&P 500 closing higher 22 out of the last 33 occasions, so I will be looking for strength in the S&P all day today.
Download all of the July expiration stats here
While You Were Sleeping
Overnight, equity markets in Asia traded mixed, with a slight bias to the upside, led by the NIKKEI, which closed up +0.62%. Meanwhile, in Europe, all markets, with the exception of the OMXS30, are currently trading higher this morning.
In the U.S., the S&P 500 futures opened the overnight Globex session at 2471.00, and traded modestly lower throughout the Asian session, finding a low of 2469.25. From there, the ESU began drifting higher, and as European markets opened, traded up to 2474.00, extending the overnight range to 4.75 handles. Since then, the futures have eased off a little, and as of 6:30am CT, the last print in the ES is 2472.50, up +1 handle, with 88k contracts traded.
In Asia, 7 out of 11 markets closed lower (Shanghai +0.44%), and in Europe 11 out of 12 markets are trading higher this morning (FTSE +0.72%). Today’s economic calendar includes the Weekly Bill Settlement, the 52-Week Bill Settlement, Jobless Claims, Philadelphia Fed Business Outlook Survey, Bloomberg Consumer Comfort Index, Leading Indicators, EIA Natural Gas Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 2-Yr FRN Note Announcement, a 2-Yr Note Announcement, a 5-Yr Note Announcement, a 7-Yr Note Announcement, a 10-Yr TIPS Auction, Fed Balance Sheet, and Money Supply.
Our View
Too high to buy? Not for those who extended the all time high by 12.50 handles so far.
We can keep talking about the profit taking pullback going into the end of month and T+3 next week. We can talk about it being near the end of the week, and with the S&P 500 up every day this week, that it makes sense for some money to leave the market today or tomorrow by way of booking profits, and that would make sense. Or, we can just look at the facts, being that it’s much more difficult to short this market than it is to buy it.
Our view remains the same, you can buy any early weakness and hold, or sell the midday rallies with smaller size, and at your own risk.