JOBS FRIDAY: S&P UP 1.28%, DOW UP 1.38%, NASDAQ UP 1.32%

Danny Riley
June 10, 2013

The big guns came out in force last Friday with a take-no-prisoners rally in the S&P 500 futures.

A few days of down, get everyone all beared up and then in comes the big rip.

Look, we know we are not the Wall Street Journal, nor are we CNBC. We don't want to be because we are the source. We are not saying don't read them, but when a jobs number comes out we know where to go: to the guys in the 10-year note options. When the grains are busy we go to the largest grain operation on the floor, and when crude is cranking we go to the biggest operation on the NYMEX.

So where do you want to get your information from?  

Jobs data

We have called the non-farm payroll correctly 3 months in a row and despite the early counter-trend Friday trade, which actually moved in our favored direction, the S&P skyrocketed after the early pullback. But—and there is always a but—our question is what would have happened had the numbers been bad?

Would the S&P have gapped lower and then sold off again? We don't think so. In fact we think that there was a pre-planned agenda to move to the upside no matter what the number was. The big rally and the employment report suggest that the Fed bond buying program is not over for at least the next few months.

Big picture

Sometimes it's hard for traders to stay focused. For most of the year the price action has been guided by the idea that the S&P had to go down to go back up. That flipped over the last few weeks to the S&P has to go up before it goes back down. To understand the larger context of this change we have to go back to the big picture, which is still buying weakness in the S&P.

That price action had the bears licking their chops for more downside, but after the S&P made its 1597 low and reversed so quickly, it looks like the original price action is still in place. While it was the largest decline of the year, it looks like the selloff was like all the others this year: just another false start.

Despite the selloff last week the Dow still managed to gain +0.9%, the S&P gained +0.8% and the NASDAQ closed up +0.4%. It doesn't look like the upside party is over yet.  As we said, they huffed and puffed but couldn't blow the S&P down.

In the end we know a lot of futures traders are just waiting for the S&Ps to come tumbling down, but the bottom line is still the same: Don't mess with the Fed. Their money-printing ability is still the most powerful force at work.

Our view: Asia closed higher and Europe is trading higher. We have no economic reports this morning. Of the 18 Mondays this year 10 have closed higher, 7 lower and one unchanged. The average gain is  +6.6 handles and the average  loss for this day is -13.7 handles. I think it’s fair to say that we all know the Fed will eventually shut down its QE3 program, but not today and not next week.

At 1645 the S&P is up 48 handles from its 1597 low in just two trading days. Like we have always said, it takes days and weeks to knock the S&P down and only one to bring it back. Our view is to sell the midmorning rally and buy weakness. They ran the sell stops last week and it’s time to run the buy stops. Lastly, there is NO way all the shorts have covered. As always, please keep an eye on the 10-handle rule and please use stops when trading futures.  

  •     It’s 8 a.m. and the ES is trading 1643.75, up 5.25 handles; crude is down 64 cents at 95.39; and the euro is down 12 pips at 1.3212.
  •     In Asia, 8 out of 11 markets quoted closed higher (Hang Seng + 0.18%,  Nikkei +4.94%, TOPIX +5.2%)
  •     In Europe, 6 out of 12 markets are trading higher (DAX +0.98%, FTSE +1.11%).
  •     Today’s headline: “S&P Futures Seen Higher; Solid Growth Outlook Lifts Dollar and Global Shares”
  •     Total volume: 2.37mil ESM and 12.5k SPM
  •     Economic calendar: No scheduled economic releases
  •     Fair value: S&P +0.37, NASDAQ -2.67
  •     MrTopStep Closing Print Video:

Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.


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DISCLAIMER: The information and data in the above report were obtained from sources considered reliable. Opinions, market data, and recommendations are subject to change at any time. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any commodities or securities.