Yesterday was a good example of what happens after a low-volume selloff. The E-mini S&P 500 Dec 13 (ESZ13:CME) caught a bid and rallied 12 handles, then sold off going into the close. While volume was slightly better in the S&P yesterday, the rest of the floor was dead.
The usually busy interest rate options barely traded with the bonds down 30 ticks. Last week the 30-year Treasury bond futures (ZBZ13.CBT) traded above 135.15 and this morning they are trading 132.30.
For many years asset allocations were the buzz of the floor, but not anymore. With interest rates at zero, investors just don't move money around like they used to. It was a big trade back in the day, but it's barely talked about anymore. Maybe when rates move back up that will change.
There are several reasons the S&P futures are higher this morning: 1) The most recent sideways to lower price action has people getting short the S&P again (bullish); 2) The prospects of lower rates in Europe; and 3) Twitter.
A few weeks back I asked if the Twitter (TWTR) IPO could mark a high for the stock market. Well, here are some facts you may not know: There are 16 scheduled IPOs this week, the most since 2006. Last month's 30 IPOs were the most since October of 2004, and 2013 is on track to have the most IPOs since 2000.
While the word "bubble" has been thrown around a lot lately, the idea is really not that far out. Our view is that with so much money floating around, stocks have no place to go but up. We lean to selling the early rally and buying weakness. We put out 1785 as an upside objective a few weeks ago and as of this morning that is only 20 handles away.
As always, use stops and keep an eye on the 10-handle rule. Don't forget to catch MrTopStep on The Closing Print video found under the OptionsTV page (top bar). We report directly from the SPX pits, wrapping up the day and positioning for trade tomorrow.
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