Last Friday the S&P 500 futures closed at an all-time new contract high, backed by strong earnings from General Electric (+3.53%) and Google (+13.80%). The S&P's 2.4% gain was the largest weekly gain since mid-July. The Nasdaq Composite gained 51.3 points or up 1.3% and the Dow had a much narrower trading range, closing up 28 points to 15,399.
MrTopStep has a trading rule that says if the expiration closes firm, the following Monday should be firm. Additionally the Ned Davis S&P cash study shows the Monday after the October expiration up 20 and down 9 of the last 29 occasions. Friday the VIX saw its largest single-day decline in U.S. equity volatility since 2011, falling 17% to 13.04.
The S&P 500 is now up 158% since making its March 2009 low. That said, the E-mini S&P 500 Dec 13 (ESZ13.CME) is overextended short term, but that doesn't seem to matter as low rates and cheap money are the call for the day. We lean to selling the early rally and buying weakness, but we do think we will see some type of pullback.
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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