The stock market is melting up, and while some would like to make comparisons to the run up in the stock market prior to the 1987 stock market crash and the 1999-2000 tech bubble, we insist that neither fits the current run.
On Thursday the S&P made its 25th new all-time high of 2014 and the Dow Jones made its 14th new high and closed above 17000 for the first time in its 118-year history. It took the Dow 153 days to go from 16,000 to 17,000, compared to the 21,652 days, or 75 years, it took to get to Dow 1,000. LBJ was president then.
Traders have gotten so used to new highs they no longer even cheer. After crossing over the 1500 line in March 2000, it took the S&P 500 (^GSPC) almost 13 years or 4,790 days to break the 1600 mark. On the flip side, it only took the bulls 90 days to push the S&P above 1700 in August 2013 and only 113 days to surpass S&P 1800.
S&P 1900 was achieved on May 13, 2014, after a period shorter than a normal baseball season. Now here we are, 38 days later, looking at a probable 1985 or higher this week.
In overnight trade, 6 out of 11 Asian markets closed modestly higher and in Europe 8 out of 12 markets are trading lower. This week’s economic schedule has about half the releases of last week; there are 11 economic releases, 8 T-bill and T-bond announcements or auction, 5 Fed bank presidents speaking and the FOMC minutes. Today’s economic calendar starts with the Gallup US Consumer Spending Measure, 3- and 6-month T-bill auction and the Treasury STRIPS. The second-quarter earnings season starts Tuesday with Alcoa (NYSE: AA). Today’s notable reports include Grupo Televisa S.A (TV).
Mutual Fund Monday up 11 of the last 12
Mondays are the slowest day of the week and today will more than prove the point. As people take time off, the already slow markets are about to get a lot slower. On Thursday I spoke to a trader at an $11B hedge fund and he said most of the traders are taking time off.
You could feel the shift last week and you will really feel it this week. That said, there are always trading opportunities—you just have to be a lot more patient and take your profits quickly.
The E-mini S&P 500 futures (ESU14.CME) has been up 5 in a row, up 6 of the last 7 or up 12 of the last 15. I can expand on the up days but I think you get the point. Fighting this monster doesn’t work.
On the few days the S&P does close down it’s usually fractionally lower: -0.20, -0.70, -6.0 , -0.10. Drops of 9 or 10 handles are usually followed by rallies the next day.
If you asked the PitBull he would tell you that I was warning about the summer almost 3 months ago and said the slowdown would start after Memorial Day. Our view remains unchanged: Sell the early rally and buy weakness or just wait for the S&P to pull back and buy it.
I put out 1983-1985 two weeks ago and I think there is a good possibility we see that this week. We also will be on the lookout for the PitBull’s Thursday/Friday low the week before the July expiration.
As always, please make sure to use protective stops when trading futures…
- In Asia, 6 of 11 markets closed higher: Shanghai Comp. +0.03%, Hang Seng -0.02%, Nikkei -0.37%.
- In Europe, 8 of 12 markets are trading lower: DAX -0.21%, FTSE -0.22%
- Morning headline: “Stocks down from records as dollar shows strength”
- Fair value: S&P -7.08, NASDAQ -7.35, Dow Jones -80.02
- Total volume: LOW 841k ESU and 3.1k SPU traded
- Economic calendar: Gallup U.S. consumer spending, 3- and 6-month T-bill auction and the Treasury STRIPS .
- E-mini S&P 5001968.00+9.50 - +0.49%
- Crude102.15+0.02 - +0.02%
- Shanghai Composite0.00N/A - N/A
- Hang Seng23238.99+62.92 - +0.27%
- Nikkei 22515216.47-86.181 - -0.56%
- DAX9646.13-162.07 - -1.65%
- FTSE 1006655.29-62.75 - -0.93%