Is the e-mini S&P 500 futures market cracking?

the financial futures report

Trading volume continues to disappoint, and direction is lacking.

Hopefully, most of you are still enjoying the summer vacation. We haven't seen this type of summer doldrum trade for quite a while. In fact, we've now gone 27 trading sessions without a 1% move in either direction. This hasn't happened since the summer of 2014 and is historically rare. It is hard to believe that earlier this year, the market was moving 1% up or down hourly and now it can't seem to do it in a trading session.

The one thing I do know is this won't last. Investors and traders have grown complacent, and that is precisely the environment that breeds chaos. It isn't a matter of if, it is a matter of when volatility rears its ugly head.

This isn't a notable news week, but the FOMC minutes released tomorrow afternoon could see a reaction.


Treasury Futures Markets

zb 30 year bond futures chart2

New York Fed President William Dudley reminded the markets of the imminent rate hikes

Bonds and notes traded moderately lower on Tuesday following a slight uptick in inflation and a reminder from a Fed member that the rate hike campaign is still in effect. In fact, Dudley claims that the Presidential race will have little impact on the Fed's decision to tighten money supplies and added that the US economy would likely improve later in the year. As a result, those who were getting comfortably long Treasuries early this morning quickly changed their minds.

Unfortunately, we still have nothing to go on in this market. If the ZB gets down to the 170 area, we might be interested in turning slightly bullish based on seasonals and technical analysis but we'll have to see what it looks like once we get there. Obviously, the big picture is that Treasuries are extremely high.

Treasury Futures Market Analysis

**Bond Futures Market Consensus:** Seasonal tendencies are still bullish, but the charts are neutral. We don't see any edge either way...waiting for a clearer picture.

**Technical Support:** ZB : 170'24, 169'28, and 166'01 ZN: 131'14, 130'25, 130'08, and 128'17

**Technical Resistance:** ZB: 174'04, 177'08 and 178'26 ZN: 133'04, 133'25, 134'15 and 136'15

Stock Index Futures

emini futures chart

The ES is teetering, can it roll over?

The S&P is too high to buy, but selling it hasn't worked either. Nevertheless, markets can't grind sideways to higher forever. At some point, investors will look to take profits, or a bearish news story will wake up the investors who are snoozing through this sluggish bull.

Today's downturn was relatively promising for the bears in that prices refused to recover despite having several opportunities. On each of today's dips, there were bargain hunters but they simply didn't have the conviction to bring prices out of the hole. This is a different feel than we have been seen in recent weeks and leads us to believe we might finally be in store for a corrective move.

**From yesterday, but still the overall idea:**

The ES is creeping up on an RSI reading of 70, which has historically been a bull market killer (at least temporarily). You might recall we wrote in our newsletter a few weeks ago that because of the lack of volatility, oscillators couldn't be trusted. This isn't quite as true as it was then but it is still worth noting that the low volatility could mean the ES would need to make a move above 2200, maybe even as high as 2217 to truly reach an extended RSI (even though it is only three RSI points away).

Accordingly, even if we are right about this market getting toppy near a 70 RSI, that doesn't mean it is as simple as selling at the current level and placing a tight stop loss order. Bearish traders will likely be forced to endure some pain before the market moved favorably.

We realize that the trend is higher and that it is sometimes the friend of traders, but the truth is the risk of being long at these levels probably doesn't justify the risk that comes with being "long and wrong". If this market ever goes into correction mode, it could be fierce.

Stock Index Futures Market Ideas

**e-mini S&P Futures Market Consensus:** The market is growing dangerously overbought, but that doesn't mean we can't see 2200 or even 2217 before rolling over. We wouldn't want to be long, the ES could be an accident waiting to happen.

**Technical Support:** 2166, 2140, and 2102

**Technical Resistance:** 2199, 2217, and 2234

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: 2192, 2201, and 2217

ES Day Trade Buy Levels: 2175, 2167, and 2153

In other commodity futures and options markets....

June 23 - Go long corn futures near 392 using mini contracts (the beginning of a scale trade). Full-sized contracts can be used if available margin and risk tolerance is appropriate.

June 30 - Buy September mini (or full-sized) wheat near $4.47.

July 5 - Add to the long mini corn (or full sized) near $3.45.

July 14 - Sell the corn add-on near 370 to lock in a profit (hold the original entry).

July 14 - Add to the short ES call trade by selling a September 2235 call for about 10.000 in premium.

July 29 - Buy back September ES 2235 call to lock in gain.

July 29 - Buy mini corn future near $3.33 to average entry cost lower.

July 29 - Buy mini wheat to add to our long and adjust the average position entry to $4.25ish.

(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)

Carley Garner

DeCarley Trading (a division of Zaner) 
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**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 a 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 representation is being made that price patterns will recur in the future.

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