Quick thoughts on the ES route and ZB run

the financial futures report

China is ruling the roost, U.S stock index futures markets flailing

Today marked the end of this week's economic calendar, which leaves tomorrow's fate nearly entirely at the hands of tonight's Asian trading session. If we could put blinders on to block out Chinese volatility, we'd probably feel relatively upbeat about the prospects of the e-mini S&P futures from here. Unfortunately, China matters....**a lot!** The markets know this. With that said, we still expect the Chinese government to come to the rescue (again). Eventually, they'll find a way to get the job done for now (can kicking).




T-Bond Futures are roaring higher

t bond futures chartBuyers are flocking to treasury and gold futures seeking safety. As we all know, the validity of just how safe either of those particular markets are is up for debate. Nevertheless, once a common theme takes hold, investors tend to run with it. We'll admit T-bond futures are getting a little pricey up here, but that doesn't mean they should be sold. In fact, the chart suggests the frenzy could extend the ZB futures contract well into the 160s. If you are trading 10-year note futures, the run could see 129 to 130.

When the futures markets panic, and complacent bears (short sellers) are being squeezed out of the market, there is no limit to the lack of logic. Be careful!

**From Friday but worth noting:**

We've noticed one of the seasonal services is issuing a buy recommendation in the ZB from now through September 1st. We have a hard time getting bullish from this level, but if you are holding bearish positions you should likely make sure your bet is hedged. 15 of the last 15 years have seen the 30-year bond move higher in the last two weeks of August.

Treasury Futures Market Analysis

Bond Futures Market Consensus: We doubt the buying has run its course; too many shorts, and strong seasonals are pointing higher. Look for 129 to 130 in the 10-year note futures and 164ish in the 30-year bond futures.

Technical Support: ZB : 156'15, 152'30, 150'19, and 148'13 ZN: 127'06, 126'08, and 125'09

Technical Resistance: ZB : 161'13 and 164'01 ZN: 128'18, and 129'03.



e-mini S&P futures broke 2060 technical support, and quickly moved toward 2033

In yesterday's newsletter we noted the possibility of a quick plunge into the low 2030s should support fail to hold at 2060. We would have preferred to see the first level of support hold, but we e mini s and p 500aren't panicked. Some traders on the NYSE are describing today's sell-off as a "buyers strike". This means that, according to their observation, the sellers weren't necessarily motivated early in the day but there simply weren't any buyers to pick up the slack. In other words, routine selling turned into something much more. Unfortunately, in thinly traded summer markets, this type of environment can exacerbate moves in the equity markets. Particularly on the downside because active traders have a tendency to want to be "short", while less active traders tend to be long (buy and holders).

Our chart analysis of the ES futures contract points toward swift support near the 2030ish area. If the bulls are lucky, this price will be seen on a Sunday night gap lower in the futures markets, which tend to be the most fruitful buying opportunities for futures day traders.

For the moment, we feel "good" about 2030ish holding support.

**Don't forget about seasonals:**

Be aware of a seasonal buy signal issued by MRCI that suggests the ES has a tendency to trade higher from August 19 through September 13th. According to the service, this trade has worked 87% of the time over the previous 15 years. With this in mind, it seems to make sense to be bullish on dips for now.

Stock Index Futures Market Ideas

e-mini S&P Futures Market Consensus: 2033ish support should hold, we like the idea of getting bullish down here!

Technical Support: 2033, and 2012

Technical Resistance: 2062, 2088, 2111, 2123 and 2137

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**

Sell Levels: 2060 (minor), and 2083

Buy Levels: 2033 and 2012

In other commodity futures and options markets....

May 14 - Buy an October Sugar 1325 call, sell a 1425 call, and then sell a 1225 put. This should be an even money spread, or free trade, but involves margin and unlimited risk below 1225. The max profit is about $1100 before transaction costs.

June 16 - Buy back short October sugar 1425 call (part of spread) to lock in the profit. We'll hold the other legs of the option spread for now (which are under pressure).

June 29 - Go long the Aussie dollar via e-micro futures near 7640ish.

July 6 - Add to the bullish Aussie dollar trade with the purchase of another contract (e-micro for most). This dollar cost averages the position to a more favorable level.

July 21 - Buy December e-micro gold near $1106.

(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more. Email us for more information)

Follow Carley Garner on Twitter