US pre-market report 11 December 2017

Stocks in Asia ended sharply higher, the European Union and London agree on Brexit divorce terms and the Stoxx 600 gained +0.80% and the FTSE and DAX were up almost 1%. Throw in U.S. employers adding 228K jobs, and it all added up to an early push up to 2652.00 in the S&P 500 futures. The better jobs report pushed the CME fed funds to a 90% probability of an 0.25bps increase during next week’s FOMC meeting.

We live in a world of good and bad news, but the markets tend to rally on both. Next week is mid month, and the November options expiration. The markets look like they are on track for higher prices, and the only wild card we see right now is North Korea. We said last week that traders we’re ‘off base’ after the prior weeks selloff down to 2605. We also said the ‘dip buyers’ would come piling back in, and that’s exactly what happened.

Friday started with an overnight Globex trading range of 2640 to 2652, and a total of 190,000 contracts traded. On the 8:30 CT futures open the ES traded 2649. After the open the ES chopped up and down above the vwap, made several lower highs, and then sold off down to 2646.50 at 9:18 CT. After the push lower the futures trade back up to 2651.75, one tick shy of the Globex 2652.00 high. The next move was back down below the vwap at 2647.25 and then back up to a double top at the 2551.75 level before breaking through and moving up to 2655.00.

It’s really hard to keep the index markets down when volume is so light. At 1:30 CT total volume was 500,000 contracts, with 190,000 of that coming from Globex, and 10,000 ESZ/ESH spreads traded. That means only 300,000 in the outrights, and if you were kind and took out 50% for algorithmic and program trading, that knocks the number down to 150,000. In most cases algorithmic and HFT account for 70% or more of the daily volume in the ES.

In the end it was a very slow day. After the initial move off the jobs report the ES did some back and fill, popped back up, but never really went very far on either side. It was a typical Friday going into the Christmas holiday. On the close the S&P 500 futures (ESH17:CME) settled at 2654.00, up +11.75 handles, or +0.44%; the Dow Jones futures (YMH17:CBT) settled at 24,336, up +90 points, or +0.36%; the Nasdaq 100 futures (NQH17:CME) settled at 6358.50, up +16.75 points, or +0.26%; and the Russell 2000 (RTYH17:CME) settled at 1524.20, up +0.40 points or +0.02% on the day.

As always, please use protective buy and sell stops when trading futures and options.

  • In Asia 9 out of 11 markets closed higher: Shanghai Comp +0.98%, Hang Seng +1.14%, Nikkei +0.56%
  • In Europe 7 out of 12 markets are trading higher: CAC -0.12%, DAX +0.02%, FTSE +0.47%
  • Fair Value: S&P +2.74, NASDAQ +20.57, Dow +16.56
  • Total Volume: 1.3m ESH & 9k SPH traded in the pit

About MrTopStep

A View From the Top
MrTopStep launched in January 2009. Our name is derived from the Chicago Board of Trade pits. The most senior member in the “pit” was given the distinction of being able to stand at the “top step.”

We provide daily live trade flow from the trading floor as well as news and market observations from large hedge funds and trading desks around the world. We are centralized in the index markets with our desk 10 feet from the S&P futures pit. Our insights are direct from the trading floor and were first delivered on a closed instant message platform for more than 15 years.

Mr Top Step

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