The S&P futures made its 45th new all time contract high going into the final minutes of 2013. The ESH14 started firm and stayed firm despite over $800 mil for sale on the close. The Dow had its best year in since 1995 and the S&P since 1997.
2013 false starts
Early in 2013 I wrote this to myself “All the beginning of the year buy imbalances have to mean something.”
As they continued into the end of the first quarter I wrote a note to myself: ‘If the buying continues to support the markets, stay away from shorting.”
Earlier in my career I didn’t care what the trend was because you could always play both sides but I knew that was not how it was going to work in 2013. As the year rolled on and the S&P started to actually see some pullbacks I questioned myself but after a few “false starts” I told myself that unless something dramatic happened to change the overall price action of small sell-offs followed by larger rallies, I should “stick with it until I get burned.”
That dramatic trend-changer never really happened. Sure not all the trades were winners but by sticking with the trend I didn’t lose my focus. I never became a frustrated short seller in an uptrend, like many traders I saw.
Buying the S&P
One of the things I learned about the PitBull is that his approach to stocks was pretty much the same as to the S&P: he was a buyer. Seldom would the Bull just randomly sell a stock or the S&P.
Sure if he was long stocks and needed to protect he would sell the S&P as a hedge but most of the time if a stock went against him he would write calls against the position.
Don’t get me wrong; if he felt something big was coming to the downside he would sell the S&P but overall he was a buyer and that is what kept me solidly in the bulls camp in 2013. Quite simply, being a buyer just kept working.
The final trading hour of 2013
When the MiM showed over 90% sell side at 2:00 CT and dropped from -$200mil for sale to over $1bil for sale the short sellers came out in force. After a 1.5 handle drop the MiM started to move the other way and when it did the short sellers started to cover and within a few minutes rallied over 8 handles in the final minutes of trading.
In the first trading of 2014, the Asian markets closed mostly higher and in Europe the 12 markets are mixed evenly. Today’s economic calendar starts out with the Gallup U.S. Job Creation Index, Jobless Claims, PMI Manufacturing Index, ISM Mfg Index, Construction Spending. With the first jobs number of 2014 coming on Friday and most people on vacation we don’t expect today to be very busy.
(Click to enlarge)
Provided the S&P holds together today it looks like Santa will end up coming to Wall Street after all. The first trading day of Jan has been up 5 in a row and with volume so low its very easy to manipulate the index. It may take a few weeks to get the stock market and the volumes rolling again.
What we do know is 2014 is not going to be as easy for the S&P as 2013 was. In fact we think there will be a correction. I just hope it doesn’t get real ugly because if it does Janet Yellen will start buying the bonds again.
As for today we think its possible we see the S&P up in the first part of the day and down in the second half. lt should be a very quiet day ahead of the jobs report. Here is how the last 10 trading days of the year looked: Dec18 +31.4, Dec19 -2.6, Dec 20 +12.4, Dec 23 +8.3, Dec 24 +6.3, Dec 25 + closed, Dec 26 +7.3, Dec 27 +.10, Dec 30 -1.8, Dec 31+6.4…
As always, please don’t forget the 10-handle rule and use stops …
- In Asia, 6 of 11 markets closed higher: Shanghai Comp. -0.31%, Hang Seng +0.14%, Nikkei +0.69%
- In Europe 6 out of 12 markets are trading higher, 6 lower: DAX -0.45%, FTSE -0.31%
- Morning headline: “First Trading Day Of January Up 5 Years In A Row”
- Total volume: LOW 650k ESH and 5.2k SPH traded
- Economic calendar : Gallup U.S. Job Creation Index, Jobless Claims, PMI Manufacturing Index, ISM Mfg Index, Construction Spending, 3, 10 and 30Yr Note and Bond announcement, Fed Balance Sheet and Money Supply.
- E-mini S&P 5001830.50-10.50 - -0.57%
- Crude98.55+0.75 - +0.77%
- Shanghai Composite0.00N/A - N/A
- Hang Seng23340.051+33.66 - +0.14%
- Nikkei 22516291.31+112.369 - +0.69%
- DAX9409.72-142.44 - -1.49%
- FTSE 1006718.05-31.04 - -0.46%