US Indices on Friday's close: SPX: (-2.33%), IXIC: (-3.05%), Dow: (-2.24%) and RUT: (-1.98%)
Following Thursday's RTH session in the ESZ18 contract, overnight futures participants saw what became a temporarily successful attempt to repair the poor high - 2675 to 2699.25 - that was formed during the last part of Thursday's RTH session. That repair was carried over to the start of Friday's RTH session, where the initial balance saw a run from the opening print of 2691.75 to a session high of 2709.75. From there, a seemingly mechanical decline to 2623.25 took place on moderately negative breadth ( breadth declining further into the close) and a relatively subdued rise in implied volatility with the VIX closing at 23.23 or +9.63%. Heck, even the CBOE SKEW (114.30) closed lower! I watched volatility indices and OI all session and could not detect the fear that one would expect from that reversal of Thursday's late day short covering.
On a weaker than expected NFP, the 50 day crossing the 200 day average set off the sell orders but the RTH ES session formed a volume point of control at 2634.75, above Thursday's low spike. The close was 2635.
Since 3 October, ES has made two attempts at the 2815, which corresponds with the 61.8% retracement of the 29 October lows in addition to the recent brush with the 50% level. The way bears tell it, we are not going back through this year. On the contrary, they are hoping we are headed much lower. Some are short in the hole here and hoping the hole turns into a cavern. Here is a SPY daily chart.
Market Internals NYSE A/D lines: -1095. NYSE breadth: -4.21:1 and NASD breadth: -5.87:1. NYSE Cumulative TICK was negative all day. SPX Volume: 2.889B. NYSE MOC imbalance saw a flip to the buy side and closed at +110M to buy.
Debt Dovish jawboning by a Fed member on Friday – almost desperation, it seemed – did not stem the downward move in SPX or the upward move in treasuries. The short end got the biggest share of interest with the 2-year (-7bps to 2.70%) to 10-year (-2bps to 2.85%) spread going back up to 15 bps, and the 2-year to 30-year long bond (unchanged at 3.14%) spread now at 44 points. The inversion caused by 2-year and 3-year notes vs 5-year notes remains.
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