S&P 500: New Record Highs And 'Thin To Win'

Over the US holiday weekend the stock market and the E-mini S&P 500 futures ESM made new highs, in spite of—or possibly because of—the light holiday volume. Most of this activity took place in the Globex electronic exchange.

• The ESM14 traded up to 1899.25 on Friday, total volume including globex was 757k with 4k SPMs traded.
• Sunday night to Monday morning the ESM14 traded into another all-time high. Total volume was 73,000 ESM14 and 673 big S&P futures contracts SPM traded. The high was 1904.75, the low was 1897.00 and by Monday morning 10:30 close the ESM settled at 1904.00, up 7 handles.
• Monday night into Tuesday morning the ESM14 traded up to a new high at 1906 and added nearly 70,000 contracts.

On Monday the Asian markets closed mostly higher and in Europe 10 out of 12 markets are trading higher. Tuesday the Asian markets traded mostly lower and Europe is trading modestly higher. Despite the exchanges being closed in honor of Memorial Day the rest of the four-day week is packed with 23 economic reports, 12 T-bill and T-Bond announcements or auctions and 6 Fed governors speaking Thursday and Friday.

Today’s calendar includes Durable Goods Orders, FHFA House Price Index, S&P Case Shiller HPI, Consumer Confidence, Richmond Fed Manufacturing Index, Dallas Fed Mfg Survey, 2 Yr- Note Auction, and Atlanta Fed President Dennis Lockhart’s speech at Louisiana State University. Expected earnings reports include Bank of Nova Scotia BNS and AutoZone AZO.

Traders Almanac: Day after Memorial Day, Dow up 19 of the last 27

The low VIX plus the low volume could continue to push the ESM14 higher today. The first hurdle is overcoming last night’s new all time globex high.

Summer started over the Memorial Day weekend; most colleges are out for the summer and in the next few weeks most grade schools and high schools will be letting out. Right now the S&P is feeding off the buy stops and how thin it is. Remember that thin volume may mean orders get filled more slowly, but it also means fewer traders on the short side, thus less resistance to a rise in prices.

Last Friday total volume was under 760,000 ESM14s and that includes Globex volumes. Our view is that the bus is getting full again. The S&P has to pull back to reload the upside stops. We said over a month ago that a pop above 1888.70 would get you to 1893 and a close above 1896 would get you 1910.00.

Few traders will hurry back to work. Mondays and Tuesdays are the lowest volume days of the week and this should work in favor of the upside. We also want to keep an eye on the Globex highs as a possible resistance area. Those highs fall right on trendlines visible to any skilled technical analyst, as you can see from the chart. Plan your entries and exits accordingly.

As always please keep an eye on the 10-handle rule and please use stops when trading futures and options.

• In Asia, 6 of 10 markets closed lower : Shanghai Comp. -0.34% , Hang Seng -0.08%, Nikkei +0.23%.
• In Europe, 8 of 12 markets are trading higher : DAX +0.39%, FTSE +0.50%
• Morning headline: “Global stock markets trading at new all-time highs”
• Fair Value: S&P -2.56 , Nasdaq -1.34 , Dow -22.79
• Total volume: LOW 44k ESM and 375 SPM traded
• Economic calendar: Durable Goods Orders, FHFA House Price Index, S&P Case Shiller HPI, Consumer Confidence, Richmond Fed Manufacturing Index, Dallas Fed Mfg Survey, 2 Yr- Note Auction, Dennis Lockhart speaks. Earnings from Bank of Nova Scotia BNS and AutoZone AZO