Yesterday the S&P 500 futures continued to climb, holding the trendline support we mentioned in yesterday’s article, and it continued to make its highest print since March 14th. Today in the overnight session, the index made a 2779.75 high. The index futures have been outperforming during the European hours over the last few sessions.
Overnight, stock markets in Asia and Europe were firm, with the one exception of Italy’s FTSE MIB, which is modestly lower. The economic calendar, shown below, features a lot of items on the schedule today, but none of them are expected to be market-moving events, and tomorrow (Friday’s) calendar is extremely light.
Today is known as “roll” day. Next week is the quarterly quad witching, when along with other markets, the equity futures contracts will expire. Therefore, large firms must roll forward from the June contract (ESM18) to the September contract (ESU18), most of which will take place today and tomorrow.
What this often means for the equity futures markets is a quiet trade. Those who have been holding short the June contract will buy the June while selling the September, and those who were long will sell the June and buy the September. This means is that there is buying and selling all day and it makes it difficult for the market to trend in one direction or another.
Other factors in the next few days’ trade include the very light calendar into the end of the week and the unofficial beginning of summer following Memorial Day weekend in the U.S. The summer usually sees a quieter trade anyway, but Fridays can be exceptionally quiet with low volume while traders hit the exits to take an early weekend.
Given this, we are implementing range-bound strategies into this week’s end. Overall, our broader view is to buy dips, but with the S&P 500 futures up 100 handles since last week’s low, we have to anticipate at least some minor profit-taking into next week’s expiration. However, we are unlikely to short, nor will we buy at the top of the range, so our choice is to wait for modest pullbacks.
Expiration weeks are typically bullish-performing on a historical basis, and next week begins with another very light calendar on Monday. We expect the S&P 500 to remain in a range into the beginning of the week; however, Tuesday’s calendar starts to pick up, and we will look for more of a trend to develop at that time.
Today’s Economic Calendar:
- Weekly Bill Settlement
- Jobless Claims 8:30 AM ET
- Bloomberg Consumer Comfort Index 9:45 AM ET
- Quarterly Services Survey 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 3-Month Bill Announcement 11:00 AM ET
- 6-Month Bill Announcement 11:00 AM ET
- 3-Yr Note Announcement 11:00 AM ET
- 10-Yr Note Announcement 11:00 AM ET
- 30-Yr Bond Announcement 11:00 AM ET
- Consumer Credit 3:00 PM ET
- Fed Balance Sheet 4:30 PM ET
- Money Supply 4:30 PM ET
Tomorrow’s Economic Calendar:
- Wholesale Trade 10:00 AM ET
- Baker-Hughes Rig Count 1:00 PM ET
Monday’s Economic Calendar:
- 4-Week Bill Announcement 11:00 AM ET
- 3-Month Bill Auction 11:30 AM ET
- 6-Month Bill Auction 11:30 AM ET
- 3-Yr Note Auction 1:00 PM ET
- 10-Yr Note Auction 1:00 PM ET