day trade futures

  • Generally speaking, the stock index futures markets stumble into October

    The last week (or so) of September is notoriously weak for equities, and strong for Treasuries. We don't see any reason to buck the seasonal trend. After all, Friday's bloodbath on Wall Street is a sure fire sign that investors have not gotten over the mid-August stock market "crash".

    Although the Fed meeting is behind us, we still have to worry about the details of Janet Yellen's speech on Thursday at the University of Massachusetts-Amherst. Oddly enough, the financial markets sometimes react to non-FOMC speeches than they do the official Fed meetings. Be prepared for volatility.

  • the financial futures report

    Crude and the Yen reverse yesterday's moves, so does the ES

    Obviously, the market panicked a bit when in regard to the implication of a Yen rally. Although this is the highest we've seen the Yen in years, it is still historically cheap. Further, today's reversal suggests the unwinding of the carry trade isn't quite upon us. Accordingly, this should be somewhat supportive of the equity markets.

    On another note, the greenback is still trading sluggishly, but it has yet to break support. In theory, weakness in the dollar should help push commodity prices higher, and eventually the stock market as well. As a result, we'll need to keep an eye on the DX support near 93.00.

  • the financial futures report

    Trade tariff talk is just that, we've yet to get anything concrete. Yet, the market is emotional.

    This is nothing new, if there is anything we've learned from the first year (+) of the Trump presidency it is the conversation always starts with drama, but then settles down to something more reasonable. Unfortunately, the markets haven't quite figured that out yet. Those that believe markets are efficient, will have a hard time explaining what we've seen in the previous three or four trading sessions.

    Tariff discussions, without any concrete decisions, can't explain such big swings in asset prices. The only rational explanation for this type of volatility is (ironically) irrationality. Markets are emotional, and we are being reminded of that. The low volatility slumber of 2016 and 2017 were anomalies and are probably behind us.

    The "buy and holders" might not be happy with the market environment before us, but the reality is the expanded volatility will eventually provide opportunities for traders (particularly option sellers). Further, it might not feel like it but this is a healthier market than what we saw in late 2017 and January 2018.

  • the financial futures report

    Historically FOMC minutes have been an afterthought, but in today's climate they are a big deal to futures traders

    The futures markets have been hanging on every word that trickles from the mouths of Federal Reserve members. Even off-handed comments made on their personal time have been moving through the grape vines.

    Today's FOMC minutes didn't offer any surprises. The Fed feels like the U.S. economy is moving in the right direction, which justifies a rate hike. But overseas market turmoil (namely China) has them pressing pause. The market seemed to like what they heard.

    In more bullish equity market news, the Chinese stock market opened for trade today after being closed for an entire week in observance of a national holiday (this is odd to us because it is essentially illegal in the U.S for the stock exchange to be closed more than 3 consecutive days). Once the bell rung, Asian traders bid prices higher to catch up with the global equity market rally that had taken place without them.

  • the financial futures report

    In today's DeCarley Perspective (see here:https://madmimi.com/s/f78468) we noted the fact that the VIX is trading at historically depressed levels. Specifically, VIX futures near 15.00 and the cash market VIX near 11.00 is a relatively rare event. Even more interesting, is the fact that the VIX rarely stays at such depressed levels for long. This is because at such levels the market is discounting nearly all event risk. Traders are simply complacent, or as a former colleague might have said, "they are fat, dumb, and happy."

    On the flip side, if we are right about the VIX being near a low, the ES should be near a high.

  • the financial futures report

    China is playing Trump's game...start the discussion with a bazooka before eventually pulling out the bb gun to negotiate.

    US equity and commodity markets were reeling last night on news of new Chinese tariffs. Not surprisingly, the markets overreacted. China's tariff threats don't go into effect immediately, and there is plenty of time for negotiations to take place. Further, it is important to remember that China imports much more to the US than the US does to China. Thus, an immediate fifty handle collapse in the ES on the news probably wasn't justified. As the day wore on, traders began to realize this and put their money where their mouths were by buying into the dip.

    We saw similar action in the commodity markets, namely soybeans and the meats. We had previously recommended bullish trades in corn, soybean meal, cattle and hogs that caused some stress during today's session but appear to be on the right track. In any case, there is no logical reason to see a market such as live cattle go from being nearly limit down to limit up within the span of hours.

    There is no room for complacency, nor panic, in these markets. The goal should be to stay hedged and grounded.

  • the financial futures report

    This is what professionals call a WTH market (the "H" stands for heck).

     

    Markets undergoing vast changes in their technical outlook on a minute to minute basis are best described as WTH markets.  I have no doubt that investors who have been trained, and thus far rewarded, to "buy the dip" were putting money to work early this morning as the S&P 500 screamed higher, but I also have no doubt they are now remorseful buyers.

    The market looked equally as horrible on the close as it looked fantastic on the open. In such markets, typical market analysis techniques simply don't work and traders attempting to chase prices back and forth will wish they had never heard of momentum indicators.

    In the past, WTH markets have been followed by big moves so traders should approach the S&P with more caution than usual.

  • There is a lot of event risk floating around.


    If it isn't Chinese tariffs, it is a Trump administration investigation or Russian/Syrian turmoil.  We've gone from a world seemingly without risks throughout most of 2017 and early 2018, to a world in which there are peripheral threats in every direction. That said, despite what it feels like volatility isn't as high as it could be. Although we are seeing large point swings in the stock indices, the percentage of the swings is relatively reasonable given the height of the market and associated risks.  Further, the VIX is relatively tame when compared to past volatility.  
    Where the ES goes in the short-run is obviously akin to a crap shoot.  Nevertheless, looking back at historical patterns it is generally a poor idea to bet against the S&P 500 as it is trading in a trough ahead of earnings season; earnings seasons have a tendency to reverse trends.

  • the financial futures report

    The market is pricing in a good payroll number as it reverses pessimism over North Korea

    Late Monday afternoon I was watching a business news station. The panel was discussing the implications of a North Korea missile being fired (they were still trying to confirm the rumor that it had occurred). There was talk of a limit down opening to the E-mini S&P (the news broke during the daily afternoon pause of trading). They were right about sharp selling on the open but the bearish tone was quickly forgotten by tax reform talk. Even a 500-year flood couldn't deter the fiscal policy bulls. By Thursday's close all of this week's bearish headlines had been forgotten.

  • the financial futures report

    Crude oil futures are driving the bus

    Unfortunately for anyone holding stocks in their retirement portfolio, or anybody playing the long side of the e-mini S&P in the future market, stocks aren't trading on their own fundamentals. The broad market is simply following crude oil lower, and occasionally temporarily higher.

    It is important to remember the last time crude oil traded near $30, the S&P 500 was near 1,100, and the world was concerned we would no longer have a functioning banking system. This time around, we are in a much different situation. Unless I'm missing something, it is far less dire (unless you are long commodities). Nevertheless, something has to come back into line. Either oil, and the other beaten down commodities need to make a move higher, or stocks need to move lower.

    In recent days we've been "blessed" with some rather bold analyst calls in the commodity space. Some large and relatively well respected banks and analysts are calling for oil to fall to 20s per barrel, and in one instance expectations are for $10 crude oil!!! Perhaps these prediction will be accurate, but we have serious doubts. It smells a little like the widespread analyst expectations for $200 crude oil in 2008 when $150 crude oil was considered "cheap".

  • the financial futures report

    It's been a confusing day for the financial futures markets

    Last week we heard several Federal Reserve Presidents tout their hawkish stance; they went as far as to say an April rate hike is on the table. However, the Fed Chair Janet Yellen, took the other side of that argument in her speech to the Economic Club of New York. She emphasized measured and gradual rate hikes were the "only" way to go. She reiterated, the pace will be so slow the process could take years. However, she also stipulated the decisions made in each FOMC meeting will be data dependent.

    It seem to us, market participants would be better served simply ignoring the chatter of Fed Presidents, and focusing solely on the Chairman. Doing so would certainly reduce some of the noise caused by overzealous speculators.

    Contrary to the Fed Chair's suggestion that the economy still needs to be nursed back to life, Pending home sales were up 3.5% in February and the Case-Shiller 20-city Index saw a 5.7% increase in January. Further, the March Consumer Confidence Index jumped to 96.2.

  • ZB and ES futures trading newsletter

    GDP surprises to the upside, but weak oil futures going into the weekend negates the benefits

    Stronger WTI crude oil futures trade overnight, and the flirting of an upside breakout, had the ES buyers in full bloom. However, the crude rally was rejected by technical resistance and later in the day suffered from a smaller than expected decline in operating rigs in the U.S. Accordingly, the U.S. equity indices failed to hold overnight gains.

    On a positive note, the second estimate of second quarter GDP was reported at 1%. Under normal circumstances, this would be a disappointment but in today's sluggish environment it could almost be categorized as a blockbuster report. To boot, personal spending and personal income ticked higher along with the final reading of Michigan Sentiment.

    This is the first time, in quite a while, we've seen a string of positive economic data. Until now, the trend has been for good news to be followed by bad. Now that data is firming up we have a hard time believing the S&P will revisit the low 1800s any time soon. Nevertheless, the last few trading days in February are normally weak, so we could see a few days of back and filling before heading higher.

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