We are turning neutral in the ES for now
|It might be time for the ES to take a breather.
We've been bullish the stock market for months and continue to believe the {{166|S&P 500}} will see somewhere between 3,400.00 and 3,600.00 by the end of the year. Nevertheless, we cannot deny the technical resistance looming near 3,250.00, the never-ending headlines denoting spikes in coronavirus cases, and last, but not least, the upcoming Presidential election.
Regarding the chart, a break above 3,250.00 would surely lead to a test of the all-time-highs and we aren't sure the world is ready for that just yet. On the Covid-19 front, we have yet to see cases translate into deaths (the death rate is falling) but that can change quickly so traders and investors might be reluctant to take the market higher from here without seeing how things pan out.
The election will be a wild card. Some argue the market is seeking the stability of the challenger but others believe a continuation of the incumbent's tax-friendly policy is necessary to keep the economy moving in the right direction (particularly after the Covid-collapse). We all know markets dislike uncertainty, so this could get interesting.
Treasury Futures Markets
30-year Treasury Bond Futures
Seasonality remains bullish in bonds and notes.
Fundamentals aside, the Treasury market has a hard time going down this time of year. Also, the majority of speculators are short Treasuries and have been for quite some. Like the stocks market bears have been squeezed, we might see something similar in Treasuries. Thus, we wouldn't be in a rush to get bearish but prices are too high to be a comfortable buyer.
We suspect the ZB will poke above 184'0 and the ZN is probably seeking 141'0. We will consider turning bearish at these levels depending on how things look.
Treasury futures market consensus:
We are looking for 184'0 in the ZB and 141'0 in the ZN.
Technical Support: ZB: 173'20, 171'26, 169'08, 165'19 ZN: 137'24, 136'17, 134'28, and 133'24
Technical Resistance: ZB: 181'14, 184'12, and 189'18 ZN: 139'22 and 140'06
Stock Index Futures
The "easy" money on the upside in the stocks indices has been made.
Gains in the stock indices will need to be hard-fought from here. In fact, we are no longer comfortable having an upward bias. Although the odds continue to suggest a test of 3,250.00 test, the risk of being long and wrong is outsized. If you made money on the way up, make sure you protect it (or lock it in). Let's see what the market does with resistance.
FROM A PREVIOUS NEWSLETTER BUT STILL VALID:
While our chart suggests 3,250.00, seasonal analysis also suggests the short-term bias should be higher. On most years summer weakness doesn't appear until July 24th or later. In our view, these two schools of thought seem to be aligning. For instance, if the market does achieve 3,250.00 it will likely take a few weeks to get there. This would put the time-frame in the vicinity of the seasonal high. Thus, if you are a bear, be sure to save some ammo for the potential of a mid-3,200.00 price in late-July.
Stock index futures market consensus:
We have 3,250 in our crosshairs for the ES but the risk of being long and wrong has become large.
Technical Support: 2975, 2920, 2753, 2434 and 2168
Technical Resistance: 3250/3270, 3398, and 3575
E-mini S&P Futures Day Trading Ideas
These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled
ES Day Trade Sell Levels: 3175(minor), 3236, 3253 and 3270
ES Day Trade Buy Levels: 3097, 3027,2980/2970, 2911, 2870, and 2750
In other commodity futures and options markets...
March 2 - Roll BCI into June.
March 4 - Go short the September eurodollar near 99.37 and buy the 99.50 call option. Total risk is roughly $600 depending on fills (prior to transaction costs).
March 27 - Roll long April 136 call into May 137.50 call in the 10-year note.
April 16 - Buy June hog call spreads using the 50/55 strikes.
April 22 - Bull call spread in December corn using the 350/400 strikes for about 11.5 cents.
April 29 - Exit hog call spread for a quick profit.
May 8 - November soybean bull call spread using the 9.00 and 10.00 strikes (about 15.5 cents)
May 14 - Go long August NG futures (mini contract for most, or higher).
May 20 - November nat gas call butterfly using the $2.50/$3.00/$3.50 strikes.
May 27 - Buy the August hog 60/65 call spread.
June 4 - Go long September coffee 105/115 call spread.
June 8 - Exit July corn.
June 17 - Go long 105/112 call spread in October cattle.
June 19 - Go long the December wheat 5.00/5.50 call spread.
June 23 - Offset the short August hog 65 call to lock in a profit on that leg.
July 6 - Offset mini NG add-on futures contract to lock in a moderate gain.
July 8 - Exit August {{8862|natural gas}} to lock in a moderate loss.
July 9 - Exit the vertical call spread in November soybeans to lock in a gain.
July 10 - Exit the December wheat 500/550 call spread to lock in a profit.
July 14 - Exit the October {{8914|Live Cattle}} 105/112 call spread to lock in a moderate gain.
Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.
Seasonality is already factored into current prices, any references to such does not indicate future market action.
There is substantial risk of loss in trading futures and options.
**These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No re
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