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Yesterday, the (ESM17:CME) traded in a 3.5 handle range leading up to the release of the FOMC minutes. Just after the minutes were released, the ES traded down to 2396.00, and then popped up to a new high at 2402.00 around 1:45. From there, the futures pulled back under the vwap at 2398.25, and then started to take out the buy stops that have been building up over the last several weeks. The day started with only 100k ESM17s traded on Globex, and at the end of the day, a mere 975k traded. It was the 5th day in a row that the futures closed higher, and is now up 59 handles from last Wednesday’s 2344 low.
Other than running some of the upside buy stops I have been talking about, it was one of the slowest trading days in the last two weeks. Clearly, ‘thin to win’ has been making a comeback. For many traders, the ES is just too firm to sell, and up to much to buy. I would like to add more about yesterday’s trade, but it was just too slow to dissect. VIX Seasonal Low Likely Set, Higher Volatility Expected
From the Stock Trader's Almanac:
Last Wednesday, May 17, the market was walloped with the worst day of the year thus far. Prior to that day, the VIX (CBOE Volatility Index) was at historic lows, trading under 10 for four straight days, and actually closed below 10 on May 8 & 9. The VIX then slowly inched higher and closed at 10.65 on May 16, and yesterday it closed at 10.68. The VIX and the broader market are essentially right back where they were one week ago, but it took four trading days to (nearly) recover that single day’s loss.
VIX’s 46.4% jump on May 17 could be the first sign that the seasonal low in volatility has already been reached this year. In the following chart, VIX weekly bars appear on top, with its 1-year seasonal pattern appearing on the bottom. In a typical year, VIX typically finds a bottom sometime from mid-April to mid-July, before briskly rebounding higher through the frequently turbulent months of August and September (since 1950, September is the worst month for S&P 500 and August is second worst based upon average percent change) to a peak in early October. From then, until the following April, during the “Best Six Months,” VIX is generally in a decline as the market is climbing higher. If VIX has reached its seasonal low for 2017, then more days like last Wednesday could be on their way.
While You Were Sleeping
Overnight, world stock markets rallied in Asia and Europe as most majors were modest to moderately green. In the U.S. the S&P 500 futures opened at 2403.00, made a low two ticks below the open. The futures pushed up to 2411.50 during the Asian session, and then up to 2412.50 after the Euro open, before sliding back down to 2405.50. As of 7:20 am cst, the most recent print is 2407.50 up 5.50 handles, with 177k contracts traded.
In Asia, 10 out of 11 markets closed higher (Shanghai +1.43%), and in Europe 8 out of 12 markets are trading higher this morning (DAX +0.14%). Today’s economic calendar includes the Weekly Bill Settlement, the 52-Week Bill Settlement, International Trade in Goods, Jobless Claims, Bloomberg Consumer Comfort Index, Lael Brainard Speaks, EIA Natural Gas Report, Kansas City Fed Manufacturing Index, a 4-Week Bill Announcement, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 7-Yr Note Auction, Fed Balance Sheet, Money Supply, and James Bullard Speaks. Our View
If today is as quiet as yesterday, let the ES do some back and filling, buy the weakness, and then look for higher prices. Eventually 2415, then 2440-2450, will come into play.
I met my first upside objective overnight at 2412.00. I still think there is more upside, but if traders get too long into the push, the ES will pull back. Keep an eye on the 2400.00 to 2403.00 area as initial support.
OPEC agreed to hold its oil production cuts until 2018, and the futures traded above 51.40, before selling off down to the 50.48. Now that the news is out, I think it's time to start selling rallies here.
PitBull: cln 27/3 turns up on a close above 5262, esm osc14/1 turns down on a close below 239036, vix osc -15/4 turns upon a close above 1135.
Market Vitals for Thursday 05-25-2017
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 10 out of 11 markets closed higher: Shanghai Comp +1.43%, Hang Seng +0.80%, Nikkei +0.36%
- In Europe 8 out of 12 markets are trading higher: CAC +0.31%, DAX +0.14%, FTSE +0.12%
- Fair Value: S&P -1.40, NASDAQ +1.93, Dow -17.89
- Total Volume: 984k ESM and 1.8k SPM traded