E-mini S&P 500 Futures (September): Settled at 4348.25, down 73.50
E-mini Nasdaq-100 Futures (September): Settled at 15,009.50, down 316.50
Yesterday’s bloodbath ended on a positive note. Not only did the S&P pare losses by 1%, but there was also more volume in the E-mini S&P in the final 30 minutes than in the opening 30 minutes. Such an occurrence isn’t uncommon upon selling into the close, but fairly rare in such a rebound. The MOC activity tells us that investment advisers and fund managers are still extremely confident in this market and expect strong seasonal tailwinds to stay on track through earnings season in the coming weeks.
We’re looking to the July selloff as a roadmap. Selling began in the prior week and picked up heavily through Asian and European hours on fears of the Delta variant and an economic slowdown on Sunday night. It also came ahead of a Fed meeting, although in the next week.
Selling in the U.S. benchmarks persisted through much of the session but rebounded strongly into the final 30 minutes, just like yesterday. The volume on the way down was above average for July but dwarfed by quarterly roll-offs in both June and last week. Following the strong close in July, price action drifted higher overnight and only briefly knee-jerked lower on the open to test into the prior day’s closing range before rallying sharply to fresh records in the coming days.
Ultimately, the wipe-out in July paved the way for buyers to exude their confidence in this market and, more importantly, for the Fed to appear more dovish at their meeting the following week.
Similarly, there was weakness in the prior week. Heavy selling took place Sunday night in overseas hours and lasted through much of the U.S. session. The move was capped off with a sharp rebound into the closing bell. Tomorrow’s Federal Reserve policy statement will almost certainly not appear as hawkish, as markets were predicting after data earlier this month showed strong Wage Growth and record job openings.
Furthermore, last week’s CPI was lukewarm relative to expectations. This doesn’t mean inflation isn’t here or won’t persist, but it allows the Federal Reserve to do exactly what they’ve told us they want to do: stay behind the curve.
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