S&P futures close higher 5 of last 6: Friday/Monday effect coming?

By: Danny Riley

S&P 500 index futures 2008-2013 and quantitative easing

The Asian markets closed mostly higher and all 12 European markets are trading higher. This morning’seconomic calendar starts with the Empire State Manufacturing Survey and the industrial production numbers. Tomorrow starts with CPI, Treasury int’l capital, housing market index and the first day of the FOMC.  The rest of the week has 9 different numbers and a boatload of Fed speak. With the S&P back near its high, both data and headlines will matter.

Da Bears

The rally in the S&P has been breaking the hearts of the bears for years. This is the stuff that kills market timers like Bob Prechter and Bert Dohmen. They get run over all year calling highs, calling for the apocalypse, and then they go quiet when the markets start going back up again. Until the Fed declares its full intentions to shut down the bond-buying program,why fight it?

Sure there have been some S&P corrections, but until the program is fully removed we won’t know what the markets are made of. The end of bond buying might, like every other supposed reason for a crash, scare everyone into selling, only to watch the market go back up.  If there is a lesson learned, it’s that being a buyer of the S&P has paid off far better than being a seller.

Our view

The current price action in the S&P is for a small pullback or selloff early in the day, followed by more of the low-volume upside grind we have been seeing for the last two weeks. In most cases the two days leading up to the Fed’s announcement are slow. But with the S&P up so much last week, who’s to say the gains will not continue?

The current thinking is that the ES could rally right up to the meeting and then sell off during. What we do know is the S&P continues to prove the crowd wrong.

Our call: Sell the early rally and buy weakness and open the Ned Davis S&P cash study. The September quad witching stats are bullish all week and it’s all buy stops up from 1697 to 1712. As always,  keep an eye on the 10-handle rule and use stops when trading futures and options.

• In Asia, 9 of 11 markets closed higher: Shanghai Comp. -0.22%, Hang Seng +1.47%, Nikkei +0.12%.
• In Europe, all 12 markets are trading higher: DAX +1.28%, FTSE +0.87%.
• Morning headline: Global stocks rally; Summers withdraws from Fed chair consideration amid strong opposition
• Total volume: 756k ESU, 1.16mil ESZ, 29k SPU and 29k SPZ traded
• Economic calendar: Empire State mfg survey, industrial production
• MrTopStep Closing Print Video

• E-mini S&P (Sep)1699.00+10.50 - +0.62%
• Crude106.53-1.01 - -0.94%
• Shanghai Composite2231.401-4.816 - -0.22%
• Hang Seng23252.41+337.131 - +1.47%
• Nikkei 22514404.67+17.4 - +0.12%
• DAX8613.00+103.58 - +1.22%
• FTSE 1006622.86+33.88 - +0.51%
• Euro1.3347