Time to "Roll" with the S&P 500

Time to "Roll" with the S&P 500

The final two sessions this week offer a very light economic calendar combined with the quarterly contract roll, which leads us to expect a quiet, range-bound trade for the next two or three sessions.

Time to
Time to "Roll" With the S&P 500 Getty Images

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

The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Please note, exchange fees may not be included in all examples provided. View the current Nadex fee schedule. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representations or warranties are given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and any trading decisions that you make are solely your responsibility. Trading on Nadex involves financial risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. Nadex contracts are based on underlying asset classes including forex, stock index futures, commodity futures, cryptocurrencies, and economic events.

Trading can be volatile and investors risk losing their investment on any given transaction. However, the design of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction. Nadex is subject to U.S. regulatory oversight by the CFTC.