So much for holiday volume in the futures markets
We were expecting the typically slow holiday trading volume in financial futures markets that generally accompanies slow trading weeks. Yet, as this newsletter was being written the e-mini S&P had already traded roughly 1.5 million futures contracts with over an hour to go in the session. Similarly, the slow grind higher that often comes with holiday weeks proved to be a failed theory. On Tuesday, S&P reached the lowest level for the index since March 27th, likely with the help from a tweet from President Trump stating "North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them! U.S.A." It is easy to see how this could put a lofty market on edge.
As has been the case lately, we doubt any of the economic data slated to be released this week will have a significant impact on the market. Pay attention to Washington DC headlines for clues. In our best guess, as long as infrastructure and tax cuts continue to be in the discussion, the S&P will move higher overall with a target of roughly 2400 in the S&P.
Treasury Futures Markets
We weren't expecting this in the Treasury market, but thus far it is simply a retest of the highs.
The RSI (Relative Strength Index) on the 30-year bond futures contract is near 65. This has marked the high of the move on several occasions. However, as we know markets can sometimes surpass expectations, so we recognize that there could be room for the RSI to see a reading of 70 before all is said and done. While there isn't a predictable relationship between RSI and the ZB, we estimate it would be equivalent to about 2 handles (2 full points).
In any case, it seems like the headwinds should start to come into play. Yields are no longer attractive and the stock market tends to move higher in April. It's hard to justify being long bonds and notes at these prices (unless things in Washington completely unravel).
Treasury Futures Market Analysis
**Bond Futures Market Consensus:** If the ES retests 2400 as expected, the Treasury market should soften.
**Technical Support:** ZB : 150'06, 149'0, 147'15, 145'20 ZN: 124'08, 123'13, 122'15 and 121'29
**Technical Resistance:** ZB: 152'25 and 153'15 ZN: 125'16, and 126'0
Stock Index Futures
Different day, but same outcome in the e-mini S&P futures.
Early morning losses in the S&P are being attributed to geopolitical concerns...the same concerns that were shrugged off last week. The late session recovery is being "blamed" on statements by President Trump suggesting Dodd-Frank reform.
In our view, regardless of the news cycle we probably would have seen the same price action. The ES is trading in a range in which the mid-to-low 2360s have been consistently sold into and the mid(ish) 2330s have been bought.
Buying early morning dips has been a goldmine for anybody willing to take on risk in the opposite direction of the intraday trend. However, the same can be said of those willing to sell into rallies. Until this changes, there isn't any other way to play it and overanalyzing the price action is counter-productive.
Stock Index Futures Market Ideas
**e-mini S&P Futures Market Consensus:**
Supportive seasonals and technical momentum should lead the ES futures contract to 2405.
**Technical Support:** 2338, 2318, and 2251
**Technical Resistance:** 2385 and 2405
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: 2360(minor), 2378, and 2391
ES Day Trade Buy Levels: 2339 (minor), 2327 and 2314
In other commodity futures and options markets....
March 9 - Sell June lean hog future near 77.00 and then sell a June 78.00 put. This offers a well-hedged bearish position with a profit potential of about $1300 but unlimited risk above 81.00.
March 9 - Buy July soybean $11.80 call for 7 cents or $350. This represents the total risk of the trade prior to transaction costs.
March 22 - Sell June Live Cattle 120 calls near 100/110.
March 29 - Exit June hog covered put trade to lock in $750 to $800 before transaction costs per contract.
March 30 - Sell July Soybean $9.20 put for about 11 cents.
April 5 - Buy back the June Live Cattle 120 calls near 42.5 to lock in a gain of about $250 per contract before transaction costs.
April 5 - Buy July soybean meal near 313.00 and sell a July 310 call for about $1300 to offer a sharp hedge.
April 7 - Sell June 10-year note near 125'11 and sell a 125.50 put to hedge.
(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.