The lack of stock index futures volatility is shocking, this cannot last forever.
Summer trading is always slow, and often boring, but this is getting ridiculous. Today's 20ish point sell-off in the S&p (a mere 1% move) felt earth shattering relative to what we've been seeing. Yet, we noticed something interesting. Today's move brought the September e-mini S&P futures from overbought to oversold, based on the RSI (Relative Strength Index) in a single trading session.
In short, the lack of volatility this summer has interfered with the ability of technical oscillators to determine overbought and oversold levels. With this in mind, traders should be highly skeptical trying to "go long" anything equity market related on the first sign of oversold. Those trading the e-mini S&P last August will tell you, the market was technically oversold on the first day of the correction but the ES dropped another 200 points in the few days following.
Don't trust oversold oscillators until volatility comes back to normal!
Bond futures down with stocks?
Treasuries have been full of surprises lately. First off, we are surprised the market spent Monday and Tuesday erasing Friday's gains. Second, although prices closed well off the day's lows, the fact that bonds and notes settled in the red in the face of the largest down day in stocks in several weeks, is stunning (not that the S&P sell-off was that dramatic). Lastly, if bonds were going to sell-off despite the odds, they should have at least tested support levels (169'28 in the ZB and the mid-131's in the ZN) before recovering.
We aren't sure what to make of this price action, nor do we see any compelling arguments in favor of taking aggressive positions in any direction at the current prices. However, we do believe the path of least resistance is higher; particularly if stocks begin to rollover.
Treasury Futures Market Analysis
**Bond Futures Market Consensus:** The path of least resistance is higher. A retest of the highs, or moderately new highs seem likely.
**Technical Support:** ZB : 169'22, 167'13, and 166'01 ZN: 131'14, 130'25, 130'08, and 128'17
**Technical Resistance:** ZB: 173'11, 177'08 and 178'26 ZN: 133'04, 133'25, 134'15 and 136'15
Today was a good start for the e-mini S&P 500 bears, but we wanted to see more
It is nice to see the e-mini S&P trying to break out of the trading range and even more so because it moved in the direction favorable to the short call position we recommended to our brokerage clients. However, it is hard to get excited about a 20ish point decline after nearly three weeks of consolidation.
Sell stop running and profit taking could have easily taken the market down twice as much, but it didn't. In a nutshell, we are bearish but disappointed. Maybe the payroll report on Friday can jar the market loose.
Stock Index Futures Market Ideas
**e-mini S&P Futures Market Consensus:** We were hoping or more convincing selling once support gave way. We are cautiously bearish.
**Technical Support:** 2140, 2126, and 2102
**Technical Resistance:** 2174 and 2194
e-mini S&P Futures Day Trading Ideas
**These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled**
ES Day Trade Sell Levels: 2159 (minor), 2172, and 2180
ES Day Trade Buy Levels: 2141, 2134, and 2124
In other commodity futures and options markets....
June 14 - Sell a November Fed Funds futures contract near 99.57.
June 23 - Go long corn futures near 392 using mini contracts (the beginning of a scale trade). Full-sized contracts can be used if available margin and risk tolerance is appropriate.
June 27 - Add to bearish Fed Funds futures position by selling a December FF contract.
June 30 - Buy September mini (or full-sized) wheat near $4.47.
July 5 - Exit the December Fed Funds futures contract to lock in a profit of roughly $230 to $250 per contract. We'll hold the November contract for now.
July 5 - Add to the long mini corn (or full sized) near $3.45.
July 14 - Sell the corn add-on near 370 to lock in a profit (hold the original entry).
July 14 - Add to the short ES call trade by selling a September 2235 call for about 10.000 in premium.
July 21 - Sell October cattle 96 puts for about 1.00 (some clients sold the 97 puts for about 1.10 instead).
July 26 - Buy back cattle puts to lock in a quick profit of about $250 per lot.
July 29 - Buy back September ES 2235 call to lock in gain.
July 29 - Buy mini corn future near $3.33 to average entry cost lower.
July 29 - Buy mini wheat to add to our long and adjust the average position entry to $4.25ish.
July 29 - Offset November Fed Funds futures contract to lock in a small loss (we made a few bucks on the December in a previous trade).
(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more. Email us for more information)
Carley GarnerDeCarley Trading (a division of Zaner)
www.HigherProbabilityCommodityTradingBook.com **There is substantial risk of loss in trading futures and options.** These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in a similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.