U.S. Markets closed


Danny Riley

The S&P 500 futures crept up to new highs yesterday. The S&P has closed higher 9 of the last 11 days and 6 of the last 6. We have seen a lot of bull markets and some big bounces, but 6 years into the credit crisis and the S&P up 130% from its March 9, 2009, low -- not even the Fed could have predicted how far things could go.   Over $11 trillion in market value has been replaced since the S&P traded down to 666. After Countrywide Mortgage went out of business and all the foreclosures that followed it looked like the housing market would never recover, but it is. Despite the recent warnings from the bank stress tests, the financials are on their highs, the Dow is trading at an all-time high and the SPX is trading 1556, just 1.3% away from its all-time high of 1576 set in October 2007. It has been an incredible turnaround and it’s all due to the Fed’s quantitative easing. It has been a nonstop buy fest in 2013, and it’s not over.    With nearly $60bil going into U.S. mutual and exchange traded funds, there has been a glut of cash flooding the markets. Almost every day the Dow 30 and the broader market imbalances continue to show new money being put to work in the stock market. There has been no letup in 2013.    March quadruple witch: The quadruple witching expirations have always been a turbulent time for the markets, but with electronic trading smoothing out the process, the markets up so much and the volumes so low, we think it’s safe to predict the expiration will go off without a hitch ... but the S&P will have to get past the jobless claims, producer price index on Thursday and consumer price index, Empire State mfg survey, industrial production and consumer sentiment on expiration Friday. Historically it’s an up expiration, but the stats tend to get weaker later in the week. According to the Trader’s Almanac, the March triple witch day itself (Friday) has been mixed the last 12 years, down 3 of the last 4.    

Day (Period) Geo Avg Ari Avg Median Num Up Num Dn Total
--------------------- ------------- ------------- ------------- ------------- ------------- -------------
Monday 0.25897 0.26287 0.17808 12 5 17
Tuesday 0.18798 0.19665 0.32998 19 10 29
Wednesday 0.07485 0.07755 0.01818 15 14 29
Thursday -0.06261 -0.05959 -0.0768 14 15 29
Exp. Friday -0.1292 -0.12486 -0.08718 13 16 29
PrevFri-Mon 0.17893 0.18739 -0.01331 8 9 17
Day AfterExp -0.35814 -0.3509 -0.12465 12 17 29

    The week after: The week after the triple witching is historically bearish; according to the Trader’s Almanac, the week after has the Dow down 18 of the last 25 but up 6 of the last 9.  Up 4.9% in 2000, up 3.1% in 2007, up 6.8% in 2009, up 3.1% in 2011.    T+3: Historically March ends weak. While it has a tendency to be firm in the middle of the month (S&P up 19 / down 10) with an average monthly gain of 1.3% it is the fourth best month of the year, but has been rather turbulent in recent years with some wild fluctuations and large gains and losses. March has also taken some big end-of-month hits with the last 3 to 4 days Dow a net loser 14 out of the last 23 years.   The moral of the story is the S&P looks great now and may hold up into the the March expiration and the week after, but troubled waters are coming at the end of the month / quarter.     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.    Our view: The S&P has been up 6 days in a row for a total gain of 38.8 handles. According to the Ned Davis S&P cash study, the Tuesday before the March expiration has been up 19 / down 10 of the last 29 occasions. While we are bullish, we are also concerned about the lack of any pullbacks -- the S&P can't keep going up like this forever. That said, we are sticking to our usual: we lean to selling the early rally and buying weakness. As always, keep an eye on the 10-handle rule and please use stops.   

  • It’s 7:15 a.m. and the ESH is trading 1548, down 2.5 handles; crude is up 17 cents at 92.23; and the euro is down 26 pips at 1.3034.
  • In Asia, 9 out of 11 markets closed lower, (Shanghai Comp. -1.04%, Hang Seng -0.87%).
  • In Europe, 9 out of 12 markets are trading higher (CAC +0.04%, DAX-0.05%).
  • Todays headline: “S&P Futures Signal a Lower Open.”
  • Total volume: 754k ESH, 1.6mil ESM, 43k SPH and 40k SPM traded.
  • Fair value: S&P -0.67, NASDAQ -6.01
  • Economic calendar: NFIB small business optimism index, Redbook, 3 year note auction, Treasury budget

MrTopStep Closing Print Video: https://mr-topstep.com/index.php/multimedia/video/latest/closing-print-3-11-2013 _____________________________________________________ Follow us on Twitter @MrTopStep https://twitter.com/mrtopstep Sign up for our free mailing list at http://mrtopstep.com/ for full report. 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.