On Friday, the SPX closed at 4204.11 and kept within the assumed weekly bracket. A consolidation week within the larger range ended the trading month in one of those mechanical, almost predestined kind of days here in the states. Thursday, the futures pros I watched nailed the close with style. They understood the tricky tape. But Friday, many were expecting a similar rush higher into the last 15 minutes of trade, with a popular target being SPX 4220. This did not pan out and we became victims of the end-of-month doings, a stiffer pre-market Core PCE (0.7% m/m or 3.6% y/y vs 2.4% for March) and consumer sentiment reading that implied higher prices as well. PCE is what the Federal Reserve watches most when it comes to inflation indicators. On the release of that initial 08:30 data, the benchmark Treasury note saw a bid until about 14:00 EDT then went down again, which is exactly what the NQ and NDX did. Overall, the bond market did not act crazy in the face of that PCE and sentiment data -- and that helped confirm what the Fed will probably report as the transitory effects of a post viral growth spurt…one that some predict will taper off as we move away from liftoff. As for what satisfies and is geared for popular opinion about growth, I see Mr. Krugman of the NYT left some commentary this week comparing our current situation to spinning wheels just before leaving the line starting line. Since even ES traders are watching cryptocurrency this weekend, here is another on Crypto for Dazed and Gunslinger. It is not overly technical but it's what's getting consumed on the northeastern Main Street. If an economist with no obvious disdain for our constant reinvention of value - writing in a cosmopolitan opinion section with little blind affection for the country vis-a-vis the world at large - sees crypto a novelty, it shows that Gunslinger's point about the ultimate nature of currency is starting to be appreciated.
As for the index futures, you can see in the ES profile that we are trying to balance in the last five sessions. The blue rectangles are the area with 70% of the volume and the green letters are the volume point of control. I think you could call the area between balance area from 24 to 27 May a balance within the longer-term bracket. Depending on your drawing, the price of that little balance area would run between ES 4173.50 and 4210.25, with the latter price also the volume point of control from Friday. If you look at balance that way, you might construe Thursday (ETH/overnight) through Friday's RTH action a break above that balance with a market high that does not have much excess at 4215.50 and a low ES 4201 that has more excess but 4,367 contracts. This indecision does not portend an auction finish in either direction, so it is quite hard to read. One thing for sure, it is a very classic looking profile, with the points of control for time and volume at the widest part of the curve. Anyway, if you do consider that Monday-Thursday is a four-day balance area, then you might also assume the bulls need to get going here fast, as the settle at 4204 means that we risk falling back into balance with the potential to fall back to 4173.50, the level that corresponds with the start of the single print short covering rally from 24 May. Keep in mind there is also a poor low from Thursday at 4194.25. It is three TPOs wide and it was finalized during one of the wildest closes I've seen. That close was likely influenced by end of month repositioning.
Volume was relatively light this week as many left early for the three-day weekend…and the beginning of what is typically the slower summer season. Zooming out, the derivatives situation did not change much as of Friday, with SPX 4250 the bulls' primary target into the June expirations, with 4225 a prerequisite area of hedging resistance to the run higher. 4150/4160 is an area where the bears would get their hopes up because of the heavy hedging and general technical support. A lot of implied volatility premium came out of the market this week with the VIX closing out at 16.76 and P/C ratios deflated. It was short covering galore, and you can see that partly by the weekly decline in the implied volatility. Because of the influence of the month end shenanigans, I don't sense an immediate edge going into Tuesday's cash session here so just waiting for more information. My focus early Tuesday will be on the VIX. The positive gamma crawl to 4250 would be influenced somewhat by stable to slightly higher implied volatility measures. Traders will be aware that implied vol is not just for bears, it works both ways and becomes an issue for bulls when it gets out of hand, so to speak. In sum, the technicals are bullish, but given the time of year and the gains we sit atop, I am kind of circumspect here as I wait for this week's early data.
Hi @valen1828. I would tune in to your Sunday show. The STT is a blessing and a welcome escape back to a past in your fine company. Probably good that I don’t live closer because I'd love to come to the north to and hang out with you. We know you are a curator of the STT's history and details but also that you are a gentleman as well. This is further confirmed by the fact you are obviously not afraid of the waiting chairs outside of the ladies' shopping area. At least that is what I take from some of your shopping stories. In the past, I too have been called many times to the narrow corridors - the gauntlet of stares (real or imagined) when you're called to offer advice in-between try-ons. The changing room door swings open, a damsel asks your opinion and the pressure is on. All I know is that there is girl stuff hanging everywhere and it feels like I should not be in there. I quickly calculate the risk/reward ratio of being wrong, offer my dumb advice, go back to the chairs, and wait for the next change. Fashion is a very personal thing, you know? And there is a double standard at work, because what works for us might not be good for others. It is sort of like hedging your stock positions only the consequences of giving bad advice can be worse than going into the weekend loaded with options when the VIX/implied volatility is deflating. A builder of character, I tell you, but I'm preaching to the choir Val.
My mate lives down the coast from you (if my recollection of your location is correct) and he said he has mangos trees near his house. He could show me how to get to your area. But yeah, everything is going alright here. The weather is warmer and dryer and everything is green. The birds are nesting, and deer are about to have their babies, so they are cautious and stay by the forest edges. Now just waiting for this market to do something.
Hi @golden6, I would definitely be supplying the drinks. Remember, the whole reason you would need them is to cope with me. I saw your posts on gold…I think we will have the futures to watch even before the cash market opens. Well, just when I thought it was safe to come out…the bunker of shame again :S
Thanks for checking in @Malaga and hope you are feeling better. I didn't know for sure how many specs were sort the doldrums, but the indecision thing rings familiar as that is how SPX is behaving lately. Our RUT small caps had a few good days but that does not relate directly so I just watch the traffic here to get a general feel for interest in the microcaps. Guess you are keeping busy while waiting to figure out what bug you're dealing with. Well, statistically speaking you're likely fine but I hear you and know the feeling. If the dreaded rona is possible you can't be too careful.
