Buy programs drive prices higher
After making new all-time contract highs in the S&P 500 [^GSPC13-SNP] and Dow Jones Industrials [^DJI-DJI] yesterday, this morning 11 out of 11 Asian markets closed higher and 11 out of 12 European markets are trading higher.
Today’s economic and earnings calendar starts with the international trade numbers, jobless claims, productivity and costs, Philadelphia Fed President Charles Plosser’s speech to the annual Cato monetary policy conference in Washington, Fed Vice Chair Janet Yellen confirmation hearing before the Senate Committee on Banking, Housing and Urban Affairs, EIA natural gas report, 30-Yr bond auction, Fed balance sheet and money supply.
Yesterday was a great example of what we call a good old-fashioned “S&P shake and bake.” After several attempts at making new highs and a few small pullbacks, the power mechanics showed back up in force yesterday.
Road map in the S&P 500
There was a road map at work yesterday. Do you know how we knew? We knew it because whenever the S&P futures [ESZ13-CME] do buy programs at 9:00, at 9:30, 10:00, 10:30, 11:00 (on the half hour) the S&P is telling you there are bigger things at work. Yesterday that bigger thing was a rip through the 1774.50 contract high and a run of all the stops just below that level and above it.
After 1:00 PM yesterday we put out several warnings about not being short and one said to “beware shorting the S&P.” After looking at the open interest in the S&P options we knew the gig was up. It all became so clear: Yellen talking more quantitative easing and the S&P closing in on its contract highs. You could feel what was coming.
Our view is as it has always been: higher prices. If you have not noticed, we never called out lower prices after any selloff all year because we never thought the S&P was going down, nor do we now.
Is it possible we see some profit-taking in late December? Sure it is, but we just do not see this train coming off the tracks anytime soon. Over a month ago MrTopStep put out a 1785.00 upside objective. As we predicted, the ESZ13 traded up to 1785.25 in Globex last night.
Look, we do not pretend to be smarter than you, but we follow price action and programs and overbought and oversold conditions. Are we right every day? No, and we don’t say we are.
Today the Ned Davis cash study for the S&P shows the Thursday before the November expiration as being up 16 / down 13 of the last 29 occasions and tomorrow, the Friday of expiration, up 18 / down 11 of the last 29. There may be some people who can’t wait to sell the S&P at these levels, but we don’t think this push is over. Our view is for higher prices over the next few days. Listen to the trend and buy weakness.
The Ned Davis S&P cash study full report includes the S&P and Nasdaq.
As always, keep an eye on the 10-handle rule and please use stops when trading futures and options.
- In Asia, 11 out of 11 markets closed higher: Shanghai Comp. +0.60%, Hang Seng +0.82%, Nikkei +2.12%.
- In Europe, 11 of 12 markets are trading higher: DAX +0.80%, FTSE +0.51%.
- Morning headline: “Global Markets Rally As Yellen Supports More Stimulus”
- Total volume: 1.67mil ESZ and 5k SPZ traded
- Economic calendar: International trade numbers, jobless claims, productivity and costs, Philadelphia Fed President Charles Plosser’s speech to the annual Cato monetary policy conference in Washington, Fed Vice Chair Janet Yellen confirmation hearing before the Senate Committee on Banking, Housing and Urban Affairs, EIA natural gas report, 30-Yr bond auction, Fed balance sheet and money supply.
- E-mini S&P (Sep)1779.00+0.25 - +0.01%
- Crude97.80-1.42 - -1.43%
- Shanghai Composite0.00N/A - N/A
- Hang Seng22649.15+185.32 - +0.82%
- Nikkei 22514876.41+309.25 - +2.12%
- DAX9106.75+51.92 - +0.57%
- FTSE 1006650.78+20.78 - +0.31%