Yesterday’s price action was more of the same for U.S. equity indices. A few hours before the open, the Bank of England announced a rate cut that sent the GBP/USD tanking. Even with the currency price action, and the BoE announcement, there was little to no effect in the ES. The globex range held under 10 handles, and the cash session range was 10.25 handles, as last week’s price action has replicated itself this week.
The 2155 area has been support, then briefly turned into resistance, and now has been converted into support again. The 2165 area, which was the beginning of the distribution area, is still maintaining itself as the ceiling for now.
Overnight global equities markets continued a modest bid higher. The S&P 500 futures chopped lower during the Asian session to make a low at 2161.00, then rallied on the European open up to 2165.25, and is currently trading at 2164.50, just after 6:00 am cst, with volume at a poor 93K.
Heading into this mornings cash open, the headline event will be the July NFP number, which is expected to be in the +180K area. After last Friday’s disappointing GDP failed to move the equity indices, then the muted response to the BoE, I’m not sure how much the NFP will affect the ESU16 today. Sure, there will likely be a moment of volatility, but it will take everything this market has to close above 2175 or below 2150 it seems.
Last month’s NFP came in as an unexpected add to the upside with 287K jobs created and the S&P 500 rallied. This was telling me that the market doesn’t seem to anticipate an interest rate hike this year anymore. It’s going to take more than a single surprise print to sway the Fed with everything else going up.
I was looking for a counter trend Friday today, but with globex volume so low, I’m not sure there will be enough volume even after the number to produce this kind of trade. Without the market having really trended all week, there is less and less to fade at this point. From my perspective, what the bears really need is a lower high, and that needs to come today. If today can reverse and sell off, closing near the low of the day pushing the benchmark index futures back below 2150, then it would appear that the bears are gaining momentum and have the control to lose at this point. It would open the door to a possibly interesting week next week looking for a ESU16 test of the 2120 area.
Best case for the bulls is rally on the NFP, or in the cash session today, pushing the index to close over the 2173 area or higher. This would keep the momentum in the favor of buyers. I think there are enough shorts in this market this week that got excited by Tuesday’s drop to run their stops pushing the markets higher to a new high close. At this point, until bears can make a push lower, this past Tuesday’s weakness appears to be nothing but noise.