Friday, July 8, 2016

Employment Data Gives S&P 500 E-mini Green Light

S&P 500 E-mini appears to have been given the green light.  Some might say the best of both worlds news for U.S. equity markets today was offered in the stronger employment data.  It was strong enough to relieve concerns that the economy would soon fall into recession while leaving expectations for any Fed policy response only far, far in the future unchanged. 

The E-mini is 30 higher as I write, having bested the session high from June 24th where it trade prior to the UK ‘Leave’ vote.  We remember noting on June 29th (‘S&P 500 E-mini Could do the Unthinkable…’) price action may be bullish enough on that day to remove the bearish implications of the June 24th huge, single session decline.  The contract met and exceeded the ‘mid’ late in the session on the 29th, finishing trade on the session high.  The S&P is higher by 3% from the 29th settlement price and having formed a bullish engulfing, has recovered 7.2%  from the June 24th low. 

Unless today’s S&P gains are relinquished in the final hour, today’s bullish advance stands out as indication that managers are willing to climb back into risk assets, comforted by the lack of market disruption over the last week. 

We would note also that the VIX has made an impressive move lower today.  The VIX sold off hard following the spike higher on Brexit, and gave signs that it would continue to fall until the middle of this week, when falling prices stalled.  At that point, volatility bias was somewhat uncertain.  With the hard decline in VIX again today and returning to the historically low levels seen in April through early June, there appears little concern at present that equities will have a hard reverse lower. 

Remember that although the light may have turned green for S&P’s, we should still look both ways in case a truck is running the light.    


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