Europe has simmered down over the last year and with it almost all of the “flash” headlines disappeared. But that was then and this is now ...
Let’s face it, traders love anything that will make the markets move and “headline news” is at the top of the list. It’s great when you get it early and it’s worthless when you get it late, but be prepared for a lot more over the coming weeks and months.
Will the S&P get past Cyprus and some of the other problem countries in the EU? We think so, but with the S&P up so much in such a short period of time, the only thing holding the markets up right now is all the new money pouring into stocks. Yes, the flows have lessened from their record January pace, but it is clear to see that the PPT is still hard at work supporting the markets. Prior to writing today's report I was planning to talk about the best 6 months for stocks coming to an end and just as I did I got an e-mail from Christopher Mistal of the Stock Trader’s Almanac to do the heavy lifting for me. The title of his piece: “Two Warnings Sound as Best 6 Months End Draw Nigh.” For those of you that do not follow the Trader’s Almanac, it has called every move right from the end of last year to now.
From the Trader’s Almanac: As noted last Friday on the blog, $DJIA Streaking Down Wall Street, three DJIA winning streaks came to an end that day. Its streak of consecutive daily gains and all-time highs and consecutive Friday gains all ended. Previous posts noted weakness had a tendency to follow when these types of winning streaks ended, which is exactly what transpired on Monday and again today.
Monday’s DJIA loss also triggered the first Down Friday/Down Monday (DF/DM) of the year. In the thirteen years since 2000, there have been 143 DF/DM. In all but 3, DJIA was lower sometime in the 90 calendar days following the DF/DM. Declines averaged 7.9%. Since DJIA’s bottom in March 2009, the subsequent decline has been milder, averaging 5.3%. This is most likely due to the Fed’s highly accommodative monetary policy combining with the tendency for post DF/DM declines to generally be milder in bull markets.
It’s nice to have smart friends like Christopher Mistal, but it’s nice to have a friend like the Pit Bull too. Over many years of working with the “Bull” there are certain patterns that he has trained me to look at and one is his rule that the S&P tends to make a high in the first week of April. Like I said, it’s nice to have smart friends, but it’s also important to remember your seasons; the worst 6 months for stocks, May to October, are just around the corner.
Our view: The ranges are expanding and so are the “head fakes.” Despite the overload of Cyprus headlines, the ESM sold off and rallied in the afternoon. Say what you like, but these are the same patterns we have seen all year. Our view is that the last 3 days have done one thing and one thing only: get people short. We think the S&P will pop to the upside today. We may sell the early rally but ideally we want to buy weakness. As always, keep an eye on the 10-handle rule and please use stops.
It’s 7:15 a.m. and the ESM is trading 1548.75, up 6.5 handles; crude is up 71 cents at 93.23; and the euro is up 50 pips at 1.2934.
In Asia, 6 out of 11 markets closed higher (Shanghai Comp +2.66%, Hang Seng +0.97%, Nikkei +2.03%).
In Europe, 10 out of 12 markets are trading higher (CAC +0.94%, DAX +0.78%).
Today’s headline: “S&P Futures Seen Higher as Policy Makers Work on Aid Package”
Total volume: 2.54mil ESM and 9.5kk SPM traded.
Fair value: S&P +7.01, NASDAQ +17.48
Economic calendar: MBA purchase applications, EIA Petroleum status, FOMC announcement and forecast and Ben Bernanke press conference
MrTopStep Closing Print Video: See Danny sing his song!!! “Mamas, don’t let your babies be traders …” https://mr-topstep.com/index.php/multimedia/video/latest/closing-print-3-19-2013Danny 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. MrTopStep, its officers, directors and its contributors may, in the normal course of business, have position(s) which may or may not agree with the opinions expressed in this report.