What Can The Closing Premium Tell Us?
The September S&P
futures (SPU and ESU) opened Monday’s session with a small 1.75 point
gap after a very tight overnight range. Local sellers closed the gap right off
the open and the futures spent the morning oscillating in and out of positive
territory. However, every time the price crept up near the 999 mark, the
contract saw good broker selling from Merrill Lynch, Fuji Bank, Refco, and J.P.
Morgan. After taking a lunchtime dip to test the session low, three more
attempts at the 999 level were turned back during the chopfest afternoon action.
The September S&P 500 futures closed with a loss of -2.75, and in the lower
third of what turned out to be the tightest daily range in months. Volume in
the September ES was estimated at 674,000 contract, off from Friday’s pace, but
still above average. One item to note from Friday’s move is that, despite the
nice move up in price, open interest in both the SPU and ESU declined, and could
be seen as another sign that the futures are running out of “giddy gas.”Â
The VIX closed under 20.00 for the second session
in a row, and other than that, nothing has really changed on the daily
scene. The market is telling us that the futures are in a defined trading range,
and until something changes (i.e., a breakout or breakdown), we work with what
we have (see chart).
On Tuesday morning, the economic
waiting game is over with the July Consumer Confidence report, which is expected
to come in at 85.0, an increase over June’s 83.5. With that, expect the
volatility to heat up as well. The larger-than-normal closing discount of the
S&P 500 futures to the cash S&P 500 index implies that the futures could be in
for a rough start to the session (see below).
What Can the Closing Premium
Tell Us?
Futures Close at Weak Discount to the Cash
Index – If the futures gap up the next morning, watch for a 1st retracement
down.
Futures Close at Strong Premium to the Cash
Index – If the futures gap down the next morning, watch for a 1st
retracement up.
Futures Close with an Unusually Weak Discount
or Strong Premium – Can imply a continuation day from the previous day.
Daily Pivots for 7-29-03
| Symbol | Pivot | Â Â Â Â Â R1 | R2 | R3 | S1 | S2 | S3 |
| COMP | 1734.06 | 1741.87 | 1748.41 | 1756.22 | 1727.52 | 1719.71 | 1713.17 |
| INDU | 9268.28 | 9302.06 | 9337.61 | 9371.39 | 9232.73 | 9198.95 | 9163.40 |
| NDX | 1279.47 | 1286.92 | 1293.32 | 1300.77 | 1273.07 | 1265.62 | 1259.22 |
| SPX | 996.93 | 1000.27 | 1004.02 | 1007.36 | 993.18 | 989.84 | 986.09 |
| ESU | 995.17 | 998.83 | 1004.17 | 1007.83 | 989.83 | 986.17 | 980.83 |
| SPU | 994.87 | 998.23 | 1002.87 | 1006.23 | 990.23 | 986.87 | 982.23 |
| NDU | 1281.33 | 1289.67 | 1296.33 | 1304.67 | 1274.67 | 1266.33 | 1259.67 |
| NQU | 1281.50 | 1290.00 | 1296.50 | 1305.00 | 1275.00 | 1266.50 | 1260.00 |
| BKX | 900.21 | 904.18 | 908.31 | 912.28 | 896.08 | 892.11 | 887.98 |
| SOX | 392.52 | 397.98 | 401.54 | 407.00 | 388.96 | 383.50 | 379.94 |
| QQQ | 31.83 | 32.05 | 32.22 | 32.44 | 31.66 | 31.44 | 31.27 |
| SPY | 100.17 | 100.67 | 101.48 | 101.98 | 99.36 | 98.86 | 98.05 |
| SMH | 32.54 | 32.98 | 33.31 | 33.75 | 32.21 | 31.77 | 31.44 |
Fair Value & Program Levels
Fair Value — (0.88)
Buy Premium — 0.04
Sell Discount — (2.94)
Closing Premium – (2.92)
Please feel free to email me with any questions
you might have, and good luck with your trading on Tuesday!
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