Futures Opening Print

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Futures 101 and what to look for in the Opening Print and the Daily Futures Recap Video:

In the first part of the day the ESZ had a two-handle range, later it had a four-handle range and at the end of the day the range was a ridiculous 4.8 handles. Basically the ESZ "took out the highs and took out the lows". It traded up a little, traded back down a little. The big question, though, is why were the S&P futures open while the rest of the financials are closed? It's hard enough dealing with the program and algorithmic trading, let alone a two-handle trading range in the first hour.

Yesterday the Dow pulled back after hitting a five-year high, closing down a modest 26.5 points. The S&P closed down 0.35% and the NASDAQ slipped 23.84 points or -0.76%. Over the last few weeks the mutual/investment funds have been selling the NASDAQ and buying the Dow and S&P. With the NASDAQ up 20% on the year, this is a way for some of the funds to book some profits. This unwind has been very easy to see.

Today Alcoa (AA) kicks off the third-quarter earning season after the bell. Analysts expect the aluminum producer to post a break-even quarter, down from reporting earnings of $0.15 a share a year ago, according to data from Thomson Reuters.

As we go into the earnings season, analysts expect earnings for the period ended September to decline, the first negative result after 11 consecutive quarters of gains. The global slowdown and an anemic U.S. recovery is expected to help create one of the worst earning seasons since 2009. Wall Street analysts expect third quarter earnings per share for the S&P 500 companies to fall 2.7% vs. the same quarter a year ago and just 1.9% growth three months ago. For the last three months some of the largest companies have warned about reduced full-year profits. Now it looks like we have a three-fer going: negative third quarter earnings, a possible selloff after the election and last but not least the fiscal cliff at year end.

While we still think the S&P is going to work higher, in August the CEO of Caterpillar (CAT), bellwether of the industrial economy, warned of the greater uncertainty about global growth, predicting it could take another five years before Europe's economy begins to grow. It all sounds bad, but we bet you the earnings don't go that way.

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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MrTopStep can be followed on Twitter at twitter.com/MrTopStep
At the time of publication, Jill Malandrino and Danny Riley held no positions in the stocks or issues mentioned.

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