S&P STUTTER-STEP BEFORE T+3

MrTopStep.com

It seems like the S&P has a way of digesting bad news and then making new highs, and that’s what it’s about to do today. Like it or not, in good or bad times, the S&P futures price action is still clearly in a back and filling mode. What we also know is the S&P just doesn't have enough thrust to just go ripping higher every day, it has to stutter-step before it makes a new high. The lower volumes mean lower thrust and that makes for a lot more hang time.   

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ES 06-13 Daily  11 2 2012 - 3 25 2013
  Cyprus rained on my 1573-75 call during and just after the March expiration. With a Cyprus deal now in the making and Friday’s firmer close and the start of T+3 this week, we think the S&P has a clear shot at new highs and beyond. Jeff  Hirsch of the Trader’s Almanac said the last 4 trading days of the first quarter have been down 7 out of the last 11 and the last trading day of March has the Dow down 15 of the last 23, the Russell 2000 up 13 of the last 18 and the Nasdaq up the last 12 the day before Good Friday.    With the Dow up +10.74%, S&P up +9.16%, NASDAQ up 7.47.% and the Russell up 11.41% on the year, we think the mutual funds funds still have cash to put to work and that there will not be any walkaway until Thursday.  For those of you that do not understand T+1 to T+3, it’s an important aspect of how the big investment firms can mark up winning stocks and sell the losers. Below is Investopedia’s definition of how the T+1, T+2 and T+3 settlements work:  Definition of 'T+1 (T+2,T+3)' Abbreviations that refer to the settlement date of security transactions. The T stands for transaction date, which is the day the transaction takes place. The numbers 1, 2 or 3 denote how many days after the transaction date the settlement or the transfer of money and security ownership takes place.   Investopedia explains 'T+1 (T+2,T+3)' For determining the settlement date the only days that are counted are those on which the stock market is open. T+1 means that if a transaction occurs on a Monday, settlement must occur by Tuesday. Likewise, T+3 means that a transaction occurring on a Monday must be settled by Thursday, assuming no holidays occur between these days. But if you sell a security with a T+3 settlement date on a Friday, ownership and money transfer does not have to take place until the following Wednesday.    Do not, however, think of the period between transaction and settlement as a flex time in which you can back out of the deal. The deal is done on the transaction day--it's just the transfer that does not take place until later.   http://www.investopedia.com/terms/t/tplus1.asp   Our view: It may be a holiday week, but the economic calendar is packed with 22 economic releases, Ben Bernanke and five other Fed governors speaking and 10 T-bill or interest rate auctions and announcements, and that doesn't include any of the Cyprus headlines that will be all over the tape this week. Our view is more of one for the week than a day call and that’s that the S&P is going to make new highs .... can they sell today’s gap up? Sure, but the money train is still on the buy side. As always, keep an eye on the 10-handle rule and please make sure to use stops when trading futures. 

  • It’s 7:15 a.m. and the ESM is trading 1557.75, up 5.75 handles; crude is up 72 cents at 94.43; and the euro is down 16 pips at 1.2975.
  • In Asia, 8 out of 11 markets closed higher (Shanghai Comp -0.07%, Hang Seng +0.61%, Nikkei +1.69%).
  • In Europe, 12 out of 12 markets are trading higher (CAC +1.70%, DAX +1.35%). 
  • Today’s headline:  “Cyprus Deal Pushes the S&P to New Highs”
  • Fair value: S&P +7.71, NASDAQ +14.74
  • Economic calendar: Chicago Fed national activity index, Dallas Fed mfg survey, Fed's Dudley speaks, Bernanke speaks, USDA food prices outlook and earnings from Dollar General and the Apollo Group 
MrTopStep Closing Print Video: https://mr-topstep.com/index.php/multimedia/video/latest/closing-print-3-22-2013    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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