S&P 500 Futures: All Buy Stops And Buy Programs

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Includes: DIA, IWM, QQQ, SPY
by: Danny Riley

Yesterday was “switch day” for the S&P and Nasdaq futures. Switch day or the rollover happens at the end of each quarter when the expiring front-month contract is replaced by the next front-month contract, in this case going from the March contracts to the June contracts. The roll tends to take away volume from the outrights as traders spread out of the March contracts. With traders focusing on the roll over their daily trading, the already low volume makes it even easier to move the futures around. Over the last two-plus weeks [ESH15:CME] the futures closed lower 8 of the last 11 sessions or down 5 of the last 7, and with retail sales falling for the third month in a row yesterday the futures started reversing some of those losses.

A Day Early

Yesterday the Dow futures [YMM15:CBT] made back most of Wednesday’s losses, closing up 228 points or +1.5% to 17792.00. The S&P futures [ESM15:CME] closed up 24.5 points or up +1.3% to 2056.00 and the CME Groups Nasdaq futures [NQM15:CME] gained 23.25 points or +0.90% to 4324.75. On Wednesday we thought several times the ES was going to break out above 2057.00 but the failure led to new lows when a big sell imbalance showed up and lows on the futures close and new low overnight. Once the S&P futures opened on the 8:30 open a very big buy program hit, pushing ESH15 up sharply in the first 30 minutes. I was quick to point out on the MrTopStep room that I thought all the pullbacks would be bought.

Here is some of our actual chat in the trading room:

  • 09:53:27 TRADINGDATA2: (driley) its a big ass short squeeze – right into the PitBulls Thursday Friday low before the March Quad Witch
  • 09:53:58 TRADINGDATA2: (driley) I could still be wrong but I was a day early yesterday.
  • 09:55:20 TRADINGDATA2: (driley) I think the ES is oversold and that we go back to the 2065 area over the next few days
  • 09:56:04 TRADINGDATA2: (driley) ESH down 8 of the last 11 or down 5 of the last 7
  • 10:03:38 TRADINGDATA2: (driley) few sells but I think they have showed you their hand
  • 10:07:20 TRADINGDATA2: (driley) ES needs to do some small pull backs and some back and fill
  • 10:08:37 PITBULL: too far too fast
  • 10:21:21 TRADINGDATA2: (driley) small sells – buyers still lurking
  • 10:24:07 TRADINGDATA2: (driley) I just read the tape I don’t write it
  • 10:24:46 TRADINGDATA2: (driley) and today the algos own it on the upside

If you go back and do a time and sales you will find that everything I said was on target. After a few brief pullbacks the ES closed up 24.5 handles and ran every stop I pointed out, we actually hit our ESM15 upside objective at 2064-2065 as the June contract traded up to 2066.50. This is what I did for so many large customers on the floor –I provided a feel for what I was seeing.

Today the feel comes from futures buy and sell imbalances. There were several other bullish messages I sent out, but I think you get the point. I saw the buy programs coming, and with all the buy stops above and everyone so short I knew it was going to be a trend day up. I know I am not right every day, but if you want to see me and several others live in the MrTopStep collective, please consider joining our trading room. I believe some of the things I learned during my 38 years on the trading floor could be a help to your trading.

In Asia 6 out of 11 markets closed lower and at 6:00 CT in Europe 6 of 12 markets are trading modestly higher this morning. Today’s economic schedule has only two economic reports: PPI-FD and consumer sentiment.

UPSIDE BUY STOP FEST

Our view: Being early to the party is never good. It’s all about timing, and yesterday the S&P futures finally started moving higher and squeezing some shorts out. It was an ugly rally for the bears because there were literally no pullbacks. The traders that were not trying to buy weakness were getting run over trying to sell it. When the mutual funds are buying cash stocks like they were, it tends to help the S&P to hold the proper levels for buy programs, and with tons of buy stops about the robots went on a search and destroy mission on the upside. Like we have always said, it takes days and weeks to knock the S&P down and only one to bring it back.

Is the decline over? The VIX does not seem to be saying that, but that can change. Right now the bulls have the bears on the run, and surely not all the shorts have covered. Our view is there is still room on the upside; sell the early rally and buy weakness. This move up is not over yet.

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

  • In Asia 6 out of 11 markets closed lower: Shanghai Comp +0.70%, Hang Seng +0.11%, Nikkei +1.39%
  • In Europe 6 of 12 markets are trading higher: DAX -0.09%, FTSE -0.03%, MICEX -1.08%, Athens GD.AT +0.26%
  • Fair value: S&P -8.28 , Nasdaq -8.22, Dow -83.09
  • Total volume: 826k ESM and 18k SPH traded
  • Economic schedule: PPI-FD and consumer sentiment
  • E-mini S&P 5002041.75-22.25 - -1.08%
  • Crude56.50+2.39 - +4.42%
  • Shanghai Composite
  • Hang Seng23823.21+25.25 - +0.11%
  • Nikkei 22519254.25+263.14 - +1.39%
  • DAX11867.41+68.02 - +0.58%
  • FTSE 1006739.29-21.78 - -0.32%
  • Euro1.0494