07.31.2017
By John D'Antona

TRADING THE WEEK: Focus Turns to DC, Payrolls

Buy in May and go away.

That seems to be the prevailing sentiment on Wall Street as traders were quiet again this week as earnings, economic data, Fed speak and cash flows all signaled a market that has inflation under control and is growing a moderate pace.

Yawn. No surprises. No volatility. No trade.

Larry Peruzzi, Mischler Financial

“We have been seeing a decent amount of shorts being squeezed and retail investors, who have been on the sidelines, are putting more money to work as they try to ‘catch up’,” began Larry Peruzzi, Managing Director International Trading at Mischler Financial Group. “These points, as well as an S&P P/E ratio of 21.4 tend to be overbought signals and bears will try to make sell arguments.”

But no one is selling, Peruzzi added, as low rates, low inflation and low oil prices all conspire to make selling into the current bull market seem like a mistake. Investors are starting to be cautious in their purchases but Peruzzi doesn’t see any definitive “sell” signs – thus no real market correction event on the horizon.

Looking back at last week, trading volume rebounded above the 6 billion share per day level as traders got busier as the summer wears on. Traders reported volume jumped up to 6.58 billion shares, compared to the 5.63 billion shares the week prior, according to BATS Global Markets.

On the interest rate front, the Federal Reserve decided not to raise short-term interest rates at its policy meeting last week. Relatedly, it added that says it isn’t ready to start reducing the size of its bond portfolio but the process will get underway “relatively soon” if the rate of moderate economic growth holds up.

In the markets, the S&P 500, NASDAQ and Dow Industrials hit all-time highs last Wednesday.

Looking ahead, Peruzzi expects focus to turn to Washington as the Senate will likely again attempt to overturn the Affordable Care Act – causing many to question the ability of the Trump agenda to move forward. Also, White House staff infighting and personnel turnover will prove to be an interesting distraction for traders, Peruzzi said.

The markets can expect a mostly quiet week as Friday brings the July employment payrolls data and another 113 companies report earning next week with the bulk doing so after the market closes on Tuesday and Wednesday.

“Investors will be best served by being cautious as some strategist are calling the markets expensive, overbought and ready for a correction but the data is showing us continued growth and low volatility and inflation,” Peruzzi said. “Although we are late in the bull run we continue to seeing opportunities in sector rotation as well as in old fashion stock picking.”

In other market news, LedgerX just got the nod to clear and settle derivatives contracts for digital currencies, such as bitcoin. The U.S. Commodity Futures Commission has granted New York-based LedgerX, a bitcoin options exchange, the first license authorizing the exchange to provide clearing services for fully collateralized digital currency swaps, according to a report on Reuters.

LedgerX, which was also granted a license to operate as a swap execution facility early this month, initially plans to clear bitcoin options, the CFTC said in a statement.

Secondly, Vela Trading Technologies announced it has completed the acquisition of Object Trading, a provider of a fully-managed Direct Market Access (DMA) platform, pre-trade risk controls, and analytics applications. The Object Trading acquisition broadens Vela’s high-performance trading and market data technology solution set and complements the recent closure of the deal to acquire OptionsCity Software, a global provider of futures and options trading and analytics solutions.

Lastly, the New York Stock Exchange officially opened its NYSE American exchange last Monday, July 24th. The exchange was formerly known as the NYSE MKT Exchange. The marquee feature of the new and rebranded American will be its 350-microsecond delay upon order entry, proprietary data and outbound routing. The market also will offer a Discretionary Pegged Order.

Rival exchange IEX already incorporates a similar type delay mechanism and CHX is planning to do the same.

According to a release on the NYSE website, NYSE American will be a first-of-its-kind exchange that brings the strengths of NYSE’s features, such as electronic DMMs with quoting obligations assigned to each NYSE American listed company. NYSE American will also file rules with the SEC for new features that promote midpoint trading, including the 350 microsecond delay.

 

This Week’s U.S. Economic Indicators of Interest:

 

Monday Chicago PMI

Existing Homes Sales

 

Tuesday

 

Redbook Retail Sales

ISM Manufacturing Index

Construction Spending

Wednesday Loretta Mester Speaks

John Williams Speaks

Thursday Jobless Claims

Factory Orders

 

Friday

 

Non Farm Payrolls

International Trade

 

 

 

 

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