Fear & Loathing In The S&P

The S&P has had its shares of ups and down this year but it hasn’t gone anywhere. After 4 ¼ months of trade the only thing we know is the S&P may not be performing like it did in 2013, but it’s not going down either.

Algos running the wheel

Yesterday was a prime example of the markets doing whatever can hurt traders the most. If you’re wondering what I mean by that, let’s look at the first half hour of the S&P’s trade yesterday.

What we have learned about the S&P is that it’s almost impossible to sell a lower open, but yesterday that rule was violated right on the open with a big index arbitrage sell program. But it wasn’t the sell program that was the stunner; it was how the S&P SPM firmed up right before the 9:00 CT releases of the ISM number, almost like someone knew the number was going to be good.

Keeping  up

No one said keeping up with the markets was going to be easy, but remaining patient and picking your levels better will make the job a lot easier. Learning your risk before you get into the trade, rather than after, is also a good way to maintain your position.

The Asian markets closed mixed and in Europe 8 out of 10 markets are trading lower this morning. Today’s economic schedule starts with the Gallup US ECI number, International trade, Redbook, 2-year note auction and Jeremy Stine speaks. Earnings reports are due from Walt Disney (NYSE: DIS), DirecTV (NASDAQ: DTV), Emerson Electric (NYSE: EMR) and Whole Foods Market (NASDAQ: WFM).

Our view

The S&P will never do what everyone wants it to do. It’s been turned into a game of tomfoolery by all the algos and program trading. Yesterday was another prime example of how the algos push the S&P down to run sell stops and then reverse to the upside to get the buy stops.

Our view remains unchanged: We still see a push above 1888 leading to a quick pop to 1893 and above 1893 will be a quick push to 1910. We lean to buying the dips; sure, you can sell a few rallies, but in the bigger picture we think the S&P is still going up.

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

• In Asia, 6 of 12 markets closed higher: Shanghai Comp. +0.03%, Hang Seng -1.28%, Nikkei -0.19%.
• In Europe, 8 of 10 markets are trading lower: DAX -0.34%, FTSE -0.26%
• Morning headline: “S&P Futures Seen Higher Ahead of International Trade Numbers”
• S&P Fair Value: S&P -5.89, Nasdaq -7.93, Dow -69.37
• Total volume: 1.17mil ESM and 3.2K SPM traded
• Economic calendar: Gallup US ECI number, International trade, Redbook, 2-year note auction and Jeremy Stine speaks. Earnings from Walt Disney DIS, DirecTV DTV, Emerson Electric EMR, Whole Foods Market WFM.