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S&P 500 Futures: Trump Health Care Push Back

The S&P 500 futures were already going higher when Paul Ryan came on TV and said that the Republican’s were not going to give up on health care. He also said that in the meantime the administration was going to push forward on tax reforms and infrastructure.

The ESM17:CME traded higher and then sold off on Globex before the 8:30 CT futures open. After a quick rally up 2340.00 the ES sold off down to a new low at 2333.50 (another ‘Riley Retest’) and then starting climbing. After Monday’s sell off and subsequent rall, the overall tone seemed to be changing from one of failed rallies to one of failed sell off attempts.

Around 9 o’clock Paul Ryan came on TV and said that the Trump administration was not ready to throw in the towel on getting rid of Obamacare, and that the next moves were to start working on tax reform and infrastructure. I said in yesterday’s Opening Print that I didn’t think the short squeeze was over, and at 1:00 CT the (ESM17:CME) traded up to 2357.00, up 18.5 handles, or +0.80%, and made a new high at 2359.00.

I have to say something that I believe is first and foremost when it comes to trading the index futures markets, and how everything is ‘event driven’. These are the times when people get loaded up expecting something big to happen. Well, for some it did. On Monday the (ESM17:CME) traded down to 2318.00.

That decline was part of the aftermath of the Trump health care bill failure, but I actually think the selling was due to the weakness in Asia, and more so, weakness in Europe. If you look back the DAX was down like -1.1% at its low, and when the ES started to uptick the DAX went flying back up. To me that means the worst of the selling was over, and with the Dow having eight down days in a row, I figured something had to give, and it did…

In came MrTopStep’s no. 1 trading rule that ‘It takes days and weeks to knock the S&P down and only one to bring it back,’ and as however CNBC, FOX and Bloomberg want to paint it, we are still seeing the same overall patterns. Yes, the tone did change slightly before the republicans pulled the health care bill, but the selling really never reached any type of panic.

Once the ESM started going back up Monday and traded higher on Globex, and then started rallying again in yesterday early trade, it was not hard to see that the buyers were back and the squeeze was. Guess what? The (ESM17:CME) traded up to 2360.75.

The MrTopStep MiM started showing over $400 million for sale going into the 2:45 cash close, which pushed the ES back down to 2351.00 on the 3:15 futures close. The final MOC was Sell $1 billion. All in all the futures have put on a good show over the last few days. From Mondays 2317.75 low, to yesterday’s 2360.50 level, the ES has rallied 42.50 handles. With regard to the overall tone, the ES did a price action ‘switch’, going from every rally failing, to every pull back holding.

In terms of the overall volume the ES did 2.65 million on Wednesday of last week and yesterday’s total volume was 1.6 million. Thin to win has played its part.

While You Were Sleeping

Overnight, global equity markets were mostly higher in Asia and Europe, but they also had a mixed and choppy tone without any real trending markets. The S&P 500 futures opened globex at 2353.00 and maintained a tight and slow range pushing up to 2356.75 an hour into the Euro open. Since then the ES has sold off down to a session low of 2350.00 making a 6.75 handle overnight range. As of 6:04 am cst the last print is 2351.50, completely unchanged on the session, with volume of 96k.

In Asia, 8 out of 11 markets closed higher (Shanghai -0.36%), and in Europe 7 out of 11 markets are trading higher this morning (DAX +0.32%). Today’s economic calendar includes Bank Reserve Settlement, MBA Mortgage Applications, Charles Evans Speaks, Pending Home Sales Index, EIA Petroleum Status Report, Eric Rosengren Speaks, a 2-Yr FRN Note Auction, a 7-Yr Note Auction, and John Williams Speaks.

Our View

People can say what they like, but Trump helped the markets go up, and he also helped them go down. He helped them go down last week when the they pulled the health care bill, and he pushed the ES back up yesterday when Paul Ryan said they were not giving up on killing Obamacare.

There may be a little more buying to do, but there is also going to be some selling going into the end of the month / quarter. There should be two way flow on the last trading days of the month. Our view is to sell the early to mid day rallies and buy weakness, keeping in mind how much the ES rallied in 30 hours.

PitBull: CLK OSC -8/-24 TURNS DOWN ON A CLOSE BELOW 4713 ESM OSC -15/-6 TURNS DOWN ON A CLOSE BELOW 232622 VIX OSC 4/2 TURNS DOWN ON A CLOSE BELOW 1380.

Market Vitals for Wednesday 03-29-2017

Download (PDF, 824KB)

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

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  • In Asia 8 out of 11 markets closed higher: Shanghai Comp -0.36%, Hang Seng +0.19%, Nikkei +0.08%

  • In Europe 7 out of 11 markets are trading higher: CAC +0.06%, DAX +0.32%, FTSE -0.16% at 6:00am ET

  • Fair Value: S&P -3.45, NASDAQ +2.18, Dow -59.00

  • Total Volume: 1.6 mil ESM and 7.6 k SPM traded

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