stock index futures

  • Did stock index futures and WTI crude just decouple?

    the financial futures report

    Are we finally going to see the correlation between stocks and oil soften?

    In overnight trade, it was the same 'ol, same 'ol. Crude and stock index futures moved together in lockstep; we saw the same action in early day session trade. Yet, after the Fed meeting, each market seems to be willing to have it's own reaction to the Fed news. Crude oil squeezed, and held, well into positive territory while the stock market remained under moderate pressure. This probably isn't an immediate game changer, but it is a step in the right direction and is worth noting. Both assets trading as one isn't healthy for the financial markets, or the commodity markets. In fact, it should eventually be bullish for stocks...after all, they've taken a hit at the hands of the crude oil futures slide.

    The big news of the day was the Fed meeting. The meeting itself was considered to be "dead" going in. This means that few (nobody) believed there was a chance for a policy change, but traders were hoping for hints regarding the pace of upcoming interest rate hikes. In a nutshell, they were very careful to leave a rate hike in March as a possibility, while simultaneously noting softening conditions that probably won't warrant another immediate tightening of credit. In the end, the news was relatively neutral to slightly bearish for stocks, but seems to have been enough to throw cold water on market volatility, which is a blessing in itself.

  • Dip buyers come to the rescue in the ES futures

    the financial futures report

    Drug Stocks and Homebuilders bring stock indices down

    Off the cuff comments made by the President-elect yesterday regarding US drug companies and a realization that higher trending interest rates (despite the recent recovery) is hurting the housing market, soured the equity market rally. As is usually the case, the market wasn't reacting to changes in fundamentals but rather expectations of changes in fundamentals. Accordingly, as we go on traders will either retract their initial reactions to these events or add to them. At the moment we are merely seeing back and fill trade as expectations are tempered. Today's trade wasn't a victory for the bears or a defeat of the bulls, it was simple consolidation.

    The economic docket for tomorrow is busy, but we doubt the market will be paying attention to the second-tier reports (PPI, Retail Sales, and Michigan Sentiment). The fireworks will likely be next week with the Presidential inauguration (who knows what types of market-moving comments could be made on both sides of the isle).

  • e-mini S&P 500 futures "should" test 2026ish technical support next

    the financial futures report

    Overnight volatility blamed on a surprise Australian interest rate cut, and weak data in China but...

    Most business news stations were attributing the overnight selling in U.S. stock index futures to weak economic data in China, and an unexpected rate hike by central bankers in Australia. However, the Asian markets traded mostly higher on the news because they've fallen into the "bad news is good news" trap (weak data increases the odds of more stimulus). Further, lower rates in Australia should be a positive for the global markets overall.

    We think a better explanation for the selling was the sharp move in the currency markets. The dollar index plunged well below 93.00, while the euro soared above $1.16. These are both major milestones, which were passed in volatile trade. Thus, we believe despite the fact that a weaker dollar will boost corporate earnings, the uncertainty of volatile currency trading prompted selling in U.S. and European equities.

    Ironically, the seasonal low for the dollar and peak for the euro is due this week...so perhaps the currency markets are in the process of reversing course in the short-run. In short, last night's "break-out" might turn into a trap.

  • e-mini S&P 500 futures bears need a currency market reversal

    the financial futures report

    The euro will need to roll over for the ES to attract sellers.

    The euro currency has been on an impressive run (much to our dismay) but few have acknowledged the impact the currency markets are having on stocks and commodities. In the last 180 trading sessions, the euro and the e-mini S&P have settled in the same direction roughly 70% of the time. Thus, strength in the euro has helped hold the stock market afloat.

    Similarly, commodities such as crude oil and copper have benefited from the change in currency valuation but might not fare so well if the euro finally succumbs to gravity. In short, if the dollar can find a way to reverse course (AKA the euro weaken) we should see bellwether commodities turn south and they could easily bring the S&P 500 with them. Keep an eye on the currency market, it could be ready to turn the corner!

  • FOMC and option expiration on deck, back and filling in ES futures?

    Heavy commodities and light economic data weigh on stocks

    Two consecutive days of sharp crude oil declines reminded traders of the chaos energy markets inflict on the financial markets. As a result, the e-mini S&P suffered moderate losses in overnight trade. However, it was weak economic data that kept prices under pressure throughout the session.

    February retail sales came in at a a negative .1% for both the headline number and ex-auto. Although this was an improvement from January, it is hardly reason to go out and buy stocks. Similarly, the Empire Manufacturing data improved markedly from last month to a positive 0.6, but simply posting a slightly positive number isn't enough to get investors excited. Today's PPI data, reported a decrease in prices at the producer level of .2%. Thus, last month's hint at inflation was dissolved.

    Tomorrow we'll hear about the latest data on consumer prices and housing starts, but I'm not sure it will matter to the market. All eyes are on the FOMC interest rate decision, which will be released at 2:00 Eastern.

  • Futures markets are recalibrating to China, but most of the pain is probably over

    the financial futures report

    Holiday futures markets didn't disappoint, but the Santa Claus rally did

    As is almost always the case, thinly traded holiday markets made for some exciting trades. Perhaps they were most exciting for those on the sidelines watching from afar. A smart colleague summed up his trading in December with the following statement, "The holiday markets giveth, then they taketh away...and then some."

    Volume on Monday was on the skimpy side as traders were still enjoying the holiday environment, but China essentially forced traders back to the markets. The Chinese government quietly implemented circuit breaker rules that forced the Chinese stock market to halt trading for two sessions in a row. In fact, today's session (which occurred last night for us) lasted only minutes before trade was halted.

    Failure of the Chinese government to allow the markets to properly react to market conditions triggered a global sell-off. At times like this it is important to remember that the Chinese stock market is in its infancy, and is being regulated by an entity that detests capitalism. Nevertheless, they seem to be learning that markets cannot be controlled. The circuit breakers will be bypassed on tonight's market open. In our opinion, this is a big step toward stabilization; after all, with circuit breakers in place buyers were not allowed to step in to cushion the fall.

  • Getting Started in Stock Index Futures Trading

    Calculating Profit and Loss in Stock Index FuturesCalculating profit, loss and risk in the stock index futures complex.

    Before Putting Your Money on the Line…You Should Know the Basics. If you are like most people, you work hard for your money and the last thing you want to do is see it evaporate in your trading account. Throughout my journey in the markets, I have yet to find a fool proof way to guarantee profitable trading, but what I am certain of is that you owe it to yourself to fully understand the products and markets that you intend to trade before risking a single dollar. What you will learn from this article is merely a stepping stone to getting started in trading stock index futures, but without fully understanding the basic calculations of profit, loss and risk in the futures markets, you may never lay the foundation necessary to become a successful commodity trader.

    When most people think of the commodity markets, they imagine fields of grain or bars of gold. However, a futures contract may be written on any commodity in which the underlying asset can be considered fungible. The term fungible purely means “interchangeable”, or having the ability to “comingle”, in trade. For example, you wouldn’t prefer to have one bushel of corn over another. According to the Chicago Mercantile Exchange Group, corn is corn as long as it meets the CME Group definition of a deliverable grade.

    Financial products can be thought of in much of the same way. One unit of the S&P 500 index is just as valuable (or not) as the next. Therefore, financial products can also be considered commodities and trade similarly on futures exchanges around the world.

    Don’t make the mistake of assuming because you are familiar with the equity markets, you can automatically apply that knowledge to trading in the future markets. Despite the underlying asset of stock index futures being based on indices which are household names, the manner in which they trade and the risk they pose to traders is dramatically different than their stock market counterparts.

    Stock Index Futures Markets

    In the U.S. there are four primarily traded futures contracts based on domestic stock indices; the Dow Jones Industrial Average (or simply the Dow), NASDAQ 100, Russell 2000, and the S&P 500. There are several other stock index futures available, but as a speculator you want to be where the liquidity is and many of them simply don’t offer that.

    While stock index futures are all highly correlated in price, they have very distinct personalities. As a trader it is vital to be comfortable with the specifics of the futures contracts that you are trading and eventually the price characteristics of the underlying asset itself.


     

    S&P 500 Futures

    The S&P 500 futures contract traded on the CME, sometimes referred to as the “big board”, represents the widely followed Standard & Poor’s 500 index. This index is seen as a benchmark of large capitalization stocks in the U.S and is the most commonly traded stock Wall Street Bull index futures contract.

    There are currently two versions of the S&P 500 futures contracts traded on the CME division of the Chicago Mercantile Exchange. Although the CME has ceased trading in most open-outcry futures pits on July 1st 2015, to make way for fully electronic execution in the futures markets, the futures exchange opted to keep the full-sized S&P 500 futures contract trading in a pit. Accordingly, traders can opt to execute their S&P 500 futures orders in the open outcry pit using the “big” S&P, or electronically using the e-mini S&P 500 futures contract.

    The full-sized S&P futures contract has a point value of $250 with a minimum tick of .10. Floor brokers often refer to an S&P point as a “dollar”. For every point, or dollar, that the price moves higher or lower a trader will be making or losing $250. Thus, the contract size of the index is calculated by multiplying the index value by $250. For example, if the futures contract is currently trading at 2050.00 then one full sized S&P 500 futures contract is valued at $512,500. Similarly, a trader that goes long an S&P futures contract at 2089.40 and is forced to sell it due to margin trouble at 2053.20 he would have sustained a loss in the amount of 36.2 points or $9,050 plus the commissions paid to get into the trade. Once again, many traders aren’t willing to accept this type of volatility in their trading account and opt for the benefits of the e-mini version of the contract.

    The e-mini S&P 500 is one fifth the size of its full-sized counterpart and unlike the larger version, the minimum tick is a quarter of a point or .25. With that said, the point value is $50 and the contract size is also one fifth the size of the original contract. If the e-mini S&P is trading at 2050.00 the value of the contract would be $102,500. Now that is more like it. An e-mini S&P futures trader is exposed to risk but relative to the “Big Board” contract it is much more controllable. When it comes to leverage, less is sometimes “more”.

    A trader that goes long the e-mini S&P from 2035.00 and is able to sell the position at 2052.25 would have realized a profit of 17.25 points or $862.50. Again, this is figured by subtracting the sale price from the purchase price and multiplying the difference by $50.

    2052.25 – 2035.00 = 17.25

    17.25 x $50 = $862.5


     


    Dow Jones Industrial Average Futures

    Dow futures are listed and traded on the Chicago Board of Trade (CBOT) division of the Chicago Mercantile Exchange Group. The CBOT’s futures version of the Dow index closely follows the infamous Dow Jones Industrial Average comprised of 30 blue chip stocks.Chicago Mercantile Exchange Group Stock Index Futures

    In the past, the futures exchange provided futures traders with the ability to speculate on the DJIA in three different increments of risk and reward. However, in recent years the product listing has been streamlined a single Dow futures contract to increase efficiency; the mini-sized Dow (futures symbol YM). The DJIA mini-sized futures contract is often referred to in the industry as the “nickel Dow” because each point of movement in the futures market is worth $5 to a trader.

    Unlike some of the true commodity futures contracts, the contract size of a stock index is not fixed. In fact, there is no contract size; instead, the contract value fluctuates with the market and is calculated by multiplying the index value by the point value (which is $5 in the case of the mini Dow futures contract). Accordingly, if the mini-sized Dow futures contract settled the trading day at 17,520 the value of the contract at that particular moment would be $86,250 ($5 x 17,520). Keep in mind that the margin for the mini-sized Dow is far less than $57,600 making it a highly leveraged trading vehicle. Margins are subject to change at any time, but the average seems to be between $4,000 and $5,000. As you can imagine, being responsible for the gains and losses of a contract valued at nearly $90,000 with as little as $4,000 could create large amounts of volatility in your commodity trading account. However, it is this leverage that keeps traders coming back to the futures markets for more. Unfortunately, it is the same leverage that has resulted in many bitter ex-futures traders.

    Calculating profit and loss in the mini-sized Dow is relatively easy. Unlike many other commodities, or even financial futures, the Dow doesn’t trade in fractions or decimals; one tick is simply one point. Consequently, if a trader is long a mini-Dow futures contract from 17,257 and is able to liquidate the trade the next day at 17,348, the realized profit would have been 91 points or $455 (91 x $5). This is figured by subtracting the purchase price from the sale price and multiplying the point difference by $5.

    17,348 – 17,257 = 91

    91 x $5 = $455 (minus commissions and fees)

    Not bad for a day’s work; regrettably, it isn’t always that easy. Had the commodity trader taken the exact opposite position by selling the contract at 17,257 and buying it back at 17,348 the loss would have been $455 plus commissions and fees.


     

    NASDAQ Futures

    NASDAQ futures are listed on the CME division of the Chicago Mercantile Exchange Group; it closely tracks the NASDAQ 100 index which includes the 100 largest non-financial stocks listed on the NASDAQ stock exchange. Prior to the closure of the futures trading pits at the CME, the exchange provided traders with two alternatives in speculation on the NASDAQ, a full sized contract and an e-mini version. However, the NASDAQ 100 futures contract now only trades in an e-mini version. This is probably a positive development to the retail trading community, because the original NASDAQ futures contract (full-sized), at $100 per point, was too large and volatile for most speculators.

    The e-mini NASDAQ 100 futures contract comes with a point value of $20 (one fifth of the original $100 full-sized contract) reducing the contract size considerably. With the futures market at 4520.00, an e-mini NASDAQ contract is equivalent to $90,400 of the underlying index.

    An e-mini NASDAQ trader long from 4505.50 and subsequently able to sell the position at 4532.75 would have been profitable by 27.25 points or $545. This is figured by subtracting the exit price by the entry price and multiplying the difference by $20.

    4532.75 – 4505.50 = 27.25

    27.25 x $20 = $545 (minus commissions and fees)

    Generally speaking, the e-mini NASDAQ is the tamest speculative vehicle in the stock index futures complex in regard to daily profit and loss per contract held. Further, it also comes with the lowest margin requirement. For this reason, some beginning traders opt to trade the e-mini NASDAQ futures when dipping their toe into the futures arena. With that said, the NASDAQ 100 is far more susceptible to price moves dependent on a single stock (such as Apple) than a broader index such as the S&P 500 futures might be.


     

    Russell 2000 Mini Futures

    ICE Futures ExchangeThe mini Russell 2000 futures contract trades on the Intercontinental Exchange (ICE Exchange). It is the one and only stock index listed on ICE; consequently, it is also the most treacherous in regard to volatility. The Russell is believed to be a market leader, and it typically is, but sometimes leading the pack of stock index futures means excessive volatility.

    A commodity trader long or short the Russell futures will make or lose $100 per full point of price movement. On an average day, the Russell will see a move from 3 to 8 points but on a volatile day it isn’t out of the question to see 15 to 25 points in price movement. If you’ve done the math in your head, you’ve realized that this equates to $1,500 to $2,500 in profit and loss per contract.

    For instance, a trader that goes short a mini Russell Futures at 1221.00 and places a stop loss order at 1235.00 would be risking 14 points, or $1,400 before commission and fees.
    1235.00 – 1221.00 = 14.00
    14.00 x $100 = $1,400

    If you are looking for a lot of bang for your buck, the Russell might be for you. Nevertheless, the massive and sudden market movements make it a risky venture.

  • Ignore the death cross in the e-mini S&P future?

    the financial futures report

    Renewed concern over interest rate hikes has stock index futures reeling...or does it?

    Truth be told, the most recent drop in the S&P is a mere 50 handles, or 2.4%. Even if you measure from the April 20th high, the market has corrected a paltry 4%. In short, because this correction has been long and drawn out it seems much worse than it really is. Further, if the realization that Fed action is coming sooner rather than later is only good for a 50 point sell-off, we've come a long way since the "taper tantrum". You might recall the fiasco of 2013 which occurred when the financial markets were informed that money printing stimulus was coming to a conclusion. In our opinion, if the market was going to fall apart on the thought of another rate hike, it would have done it already.

     

  • Is a high consumer confidence reading pointing toward a stock market top?

    Futures Trading Newsletter

    Consumer Confidence at 125...are you kidding me?

    The Conference Board's Consumer Confidence index for the month of March was reported on Tuesday to be 125.6! If I recall, this index bottomed out near 20 as the stock market was making what we now know as a generational low in 2009. I started to type that the March reading was the highest I've ever seen, before noticing that it printed a 128.6 at the end of 2000. In all fairness, I was a clueless college student in 2000 so even if it happened, I probably didn't actually see it.

    The premise behind this index is that consumers are feeling emboldened by a positive view of business, labor market conditions, and the overall economy. On a side note, the survey responsible for this index was taken before the failure of the health care reform bill. Nevertheless, it is clear that consumers are feeling good and as a result, they are putting money to work in the stock market.

    If you look at a long-term chart of the Consumer Confidence index, it almost identically coincides with the direction of the stock market. With this in mind, there could be some red flags waving. In the past, we've seen major tops and bottoms in the stock market at times in which the Consumer Confidence index is at extreme highs and lows, respectively. Particularly readings in excess of 100.

    For instance, the last time the Consumer Confidence was this high in 2000, the S&P peaked dropping 50% over the next two years. Likewise, the Consumer Confidence was near 110 in 2007 just before the S&P fell 60% in the subsequent two years. Since the election, we've seen the Consumer Confidence index breach and hold above 100 for the first time since 2007 (and prior to that the early 2000s). Will this time be different?

    *It is only fair to note that the Consumer Confidence hovered above 100 in the mid-2000s for quite some time before the stock market rolled over and during that time stocks rallied nicely (until they didn't).

  • Is the e-mini S&P 500 futures market cracking?

    the financial futures report

    Trading volume continues to disappoint, and direction is lacking.

    Hopefully, most of you are still enjoying the summer vacation. We haven't seen this type of summer doldrum trade for quite a while. In fact, we've now gone 27 trading sessions without a 1% move in either direction. This hasn't happened since the summer of 2014 and is historically rare. It is hard to believe that earlier this year, the market was moving 1% up or down hourly and now it can't seem to do it in a trading session.

    The one thing I do know is this won't last. Investors and traders have grown complacent, and that is precisely the environment that breeds chaos. It isn't a matter of if, it is a matter of when volatility rears its ugly head.

    This isn't a notable news week, but the FOMC minutes released tomorrow afternoon could see a reaction.

  • Jobs - Dodd Frank = ES Futures Rally

    the financial futures report

    A healthy jobs report, a potential Dodd-Frank peel back, and renewed talks of tax cuts propelled markets higher.

    Financial futures traders loved Friday's events and they expressed that sentiment by buying into US assets. For the first time in a LONG time, the jobs report was judged by its merit as opposed to the anticipated reaction by the Federal Reserve. In other words, the markets no longer seem to be held hostage by the Fed's every move. Instead, investors are looking to speculative economic growth as the driving factor with the Fed's monetary policy as a secondary concern.

    Non-farm payrolls grew by 227,000 in January but the good news was slightly dampened by sluggish wage growth. On a positive note, the unemployment rate ticked higher to 4.8%. No, that isn't a typo...a higher unemployment rate is a positive. The increase in the unemployment rate is a sign that the labor force has increased. In short, some of those who were discouraged from looking for work have found a reason to get back on the job-hunt (remember, the headline unemployment report fails to recognize those who stopped looking for a job out of frustration but are still unemployed).

     

  • Light trading volume in the ES, melt up

    the financial futures report

    Where did the ES futures volume go?

    At the time this newsletter was being written, volume in the December e-mini S&P was creeping up on the one million mark in contracts traded. This is dramatically lower than the 1.5 to 2.0 million we were starting to get used over the last three or four weeks of trading.

    Our theory is that many of the highly leveraged market participants have moved to the sidelines after a rough period of trading. Don't forget, bear markets lure traders to the futures markets like flies on "fertilizer". This is because most speculators believe there is quicker, and bigger, profits to be made during sell-offs than can be made during a bull market phase. Their assumption is true, but it also comes with elevated risks.

    The big sell-offs in August and September brought traders to the markets, but the October rally has likely chased them back into hiding (particularly the massive short squeeze seen on Thursday and Friday of last week).

    What does this mean going forward? Two things stick out in our minds; first, the e-mini S&P 500 bears will think twice about selling into a market that has burned them (twice). Second, if these traders stay sidelined and volume remains light, the path of least resistance will continue to be higher in the stock market (light volume tends to see melt-up type of trade).

  • Once again, e-mini S&P buyers stepped in on the dip

    the financial futures report

    Despite a lack of economic data in the US, the markets found a reason to bring the ES to 2100ish.

    The economic data schedule was skimpy in the US this week so investors were focused on news coming out of China. Word of Chinese exports tumbling 10% while imports also softened by 1.9% triggered global selling in stock indices. However, as has been the case since early 2016 market corrections are merely a signal for dip buyers to put money to work. Overnight and early morning losses were quickly shored up by afternoon trading.

    On the lows of the day, technical oscillators were suggesting the sell-off had gotten ahead of itself. As it turns out, they were right. However, the lack of volatility has become silly. A 50 point decline in the S&P shouldn't constitute an oversold market.

    Tomorrow's docket is relatively busy. We'll digest inflation data along with the latest consumer sentiment readings.

  • Quick thoughts on the ES route and ZB run

    the financial futures report

    China is ruling the roost, U.S stock index futures markets flailing

    Today marked the end of this week's economic calendar, which leaves tomorrow's fate nearly entirely at the hands of tonight's Asian trading session. If we could put blinders on to block out Chinese volatility, we'd probably feel relatively upbeat about the prospects of the e-mini S&P futures from here. Unfortunately, China matters....**a lot!** The markets know this. With that said, we still expect the Chinese government to come to the rescue (again). Eventually, they'll find a way to get the job done for now (can kicking).

     

  • Slow news week (hopefully), ES should recover with solid earnings

    the financial futures report

    This week's news docket is skimpy but be cautious of the Fed's Beige Book on Wednesday afternoon.

    I'm sure there will be plenty of headlines coming out of DC, as usual, but scheduled economic news is thin. This should leave traders focused on earnings, which are projected to be relatively positive. As mentioned in the previous newsletter, when earnings season arrives during a market dip it tends to be supportive. We suspect this time will conform to the norm, leading the S&P 500 futures higher for the next couple of weeks.

    With that said, don't underestimate the potential market reaction to Wednesday's Fed Beige Book. With the Fed's interest rate hike campaign in full force, the markets will be interested in knowing their thoughts on the domestic economy.

    Also, the early April stock market dip could have been tax related selling (investors liquefying to pay tax bills). However, post-tax deadline we could see funds flow back into the market equity.

  • Slow trade in the e-mini S&P Futures ahead of Fed minutes

    the financial futures report

    Light futures market volume, and surprisingly light volatility

     

    Another wave of stock selling in China failed to excite the U.S. equity market bears. In our opinion, the bears are simply busy doing other things (not trading). In regard to both volume and volatility, this is one of the most sluggish markets we've ever seen during our time as commodity brokers. It feels like Christmas in August! (If you've ever followed the markets over the holidays, you know what I'm talking about).

    We've been reminding our readers of the fact that China is a communist country with few rules. When things get bad, they simply fabricate stability through money printing, legal restrictions on stock selling, currency market manipulation, implementing constructions projects with no real purpose, etc. Last night the Chinese central bank reached into their bag of tricks, and pulled out one of the largest cash injections into their financial system in nearly 2 years to put the brakes on economic contraction. Despite the government's intention of stability, the reaction was panic.

  • The e-mini S&P finally corrects, 2340ish is key

    the financial futures report by futures broker carley garner

    The First 1% down day in the S&P 500 since October 11th.

    Finally, we are seeing the equity market correct. Traders have been waiting months for this, but I doubt it was everything they had hoped for. Although it is a relatively decent one-day sell-off, today's action was meaningless in comparison to the post-election night rally. Further, selling was orderly and without panic. The good news is, the market is looking healthier. Corrective trade is "normal" and should be expected. As crazy as it sounds, the market needs to be bearish before traders can get comfortably bullish and buying picks up.

    Today's shake-up is being blamed on yesterday's Congressional hearings and today's uncertainty regarding Thursday's health care vote in the House. The Republicans claim they have the 216 votes necessary to pass the bill, but some last minute amendments are raising concerns.

    As we've been stating in this newsletter, the markets had priced in political perfection but governments are designed for flawed operations (checks and balances). The financial markets could get rocky as the new administration attempts to administer change.

  • The FOMC Minutes ARE a big deal for ES Futures Traders

    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.

  • Treasury and stock index futures traders awaiting the Fed and option expiration

    the financial futures report

    For Futures Traders, the Countdown to the Fed is on

    Six days from now we'll finally find out whether or not the Fed believes initiating a rate hike is a good idea. The investment community is polarized by the debate, and it seems the Fed might be too. We are still of the belief that they won't be looking to make any moves until the October or December meeting (most likely December), but either way the impact on the economy will be minimal.

    Even if they raise the overnight borrowing rate a full percentage point over the next year, funds will be historically cheap. With that said, we will likely see a knee jerk reaction to the first rate hike but that doesn't mean the actual value of financial assets have changed. More often than not, equity markets moved higher overall in the early stages of a rate hike campaign.

  • Triple witch and the Fed are around the corner, blow off high next week?

    The Fed and triple witching Friday are generally bullish events for the stock market

    Although the CME has mitigated some of the impact of the triple witch with their addition of weekly expiring options, the event still influences the quarterly expirations (March, June, September, and December). The most common course of action is a short squeeze going into expiration. In this particular instance, we are referring to Friday, June 17th. The squeeze higher often extends itself into the time the June contract goes off the board, which will be at 8:30 am Friday morning. Accordingly, those wishing to get bearish this market should look for opportunities late next week.

    Similarly, Fed meetings have generally enticed S&P buyers in the days before the FOMC's interest rate policy announcement. The two-day meeting begins on Tuesday, so we could see some buying early in the week.

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