Let’s make this short and sweet. In the last two days the mutual funds sold the losers and marked up the winners. Sure, durable goods and home prices increased, but we think one way or the other the S&P is going up.

With spring break in full gear, Passover this week and the exchanges being closed on Good Friday, there was a rush to mark up stocks. Netflix added 5.4%, Monsanto gained 4.4% and Boeing jumped 2.1%. Also helping the markets higher were the lower volumes on U.S exchanges, which fell 18% below the three-month average. With only two trading days left in the first quarter, we expect the volumes to drop even further. For most of yesterday’s S&P futures trade the contract traded in a 2- to 3-handle range.

The five-year bull market has pushed the S&P within one point of its cash-market October 2007 high at 1565.15. The S&P cash has traded above the 1560 level six times since the middle of March. This type of price action would ordinarily mean a top is forming, but the Fed quantitative easing program is still printing money, and that seems to be the ultimate support. As we come into the final days of the first quarter it doesn't all go with buying; in fact, many of the big firms like Goldman, JP and UBS have already indicated that they have billions for sale. Combined Goldman and UBS have over $22bil for sale. What we do not want to see is people getting stuck going into the holiday. Monday the mutual funds sold the losers and yesterday they selectively marked up the winners. In other words, they ran the sell stops Monday and they ran the buy stops yesterday.

In this weekend’s webinar I am personally going to take on HTF trading. There will be no holding back. While I do not profess to be an expert on the practice, my background in program trading does put me at ground zero. After working on the floor for over 35 years, I now fully agree with what the Pit Bull said over 25 years ago: “Someday this sh*t will ruin the game.” I plan on looking at the steep drop in volume from the NYSE to the CME and how this practice picks your pockets! So please join me on Saturday, March 30, at 11:00 CT/noon ET for “The Rise of Algorithmic Trading.” As I said, I do not intend on holding back .. Link to sign up: https://mrtopstep.omnovia.com/registration/pid=53251363269750

Our view: Yesterday’s rally back to 1558.50 was a struggle. The Russell 2000 was weak all day, as was the euro, which is down another 62 points (1.2803, well below the 200) as I write this. European banking contagion is a real fear. That said, we lean to selling rallies with tight stops. The S&P may bounce up again, but as the week drags on fewer  people will be trading and the volumes are sure to drop. And you can't forget about Thursday’s sell rebalance on the close.

  • It’s 7:15 a.m. and the ESM is trading 1549.75, down 7.5 handles; crude is down 42 cents at 95.92; and the euro is down 82 pips at 1.2783.
  • In Asia, 10 out of 11 markets closed higher (Shanghai Comp. -1.09%, Hang Seng +0.69%, Nikkei +0.18%).
  • In Europe, 12 out of 12 markets are trading lower (CAC -1.45%, DAX -0.85%)
  • Today’s headline: “European Political and Banking Fears Spook the S&P”
  • Total volume: 1.58mil ESM and 6k SPM traded
  • Fair value: S&P -6.77, NASDAQ -11.55
  • Economic calendar: MBA purchase apps, pending home sales, API and a ton of Fed speak

MrTopStep Closing Print Video: https://mr-topstep.com/index.php/multimedia/latest-you-tube-videos/danny-riley-closing-print/video/latest/closing-print-3-26-2013

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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