Juneteenth Market Pause: Decoding the ES Sell-Off and Fed’s Next Moves

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Our View

The ES traded 6045.00 on Globex and opened Tuesday's regular session at 6065.00. It rallied up to 6081.00 at 11:15 am and that’s when I posted this in the chat:

IMPRO : Dboy : (10:58:33 AM) : acts funny.

The ES made a few lower highs and then slowly sold off down to 6030.00 at 2:40 PM. It did act funny. The ongoing clashes between Israel and Iran, combined with retail sales declining more than expected last month—shrinking 0.9% from April—added to the unease.

When I look back on my career at my S&P desk, handling just about every type of order, big or small, during some of the largest crashes since 1980, I can clearly say that out of all those time frames, I’ve never seen a time that resembles what we are seeing geopolitically. And when you throw in the U.S.'s economic problems, it's even more alarming.

It’s easy for me to write about this, but it’s hard to make sense of it. As I write this, the nation's debt is about to hit $37 trillion. Falling Treasury auction participation can signal reduced demand for government bonds, potentially leading to a liquidity problem. If fewer investors bid, the government may struggle to raise funds, driving up yields to attract buyers. Higher yields increase borrowing costs, straining public finances. This can also ripple into broader markets, tightening credit conditions and reducing liquidity as investors hoard cash or seek safer assets.

All of this is unsustainable, but the markets are overlooking it. The patterns remain the same: sell off, drop on Globex, open lower, and rally.

At 3:23, after trading in a narrow range for almost two hours, the ES started to go bid. This is right around the 3:25 time that I look at for a buy or sell program that usually helps determine the late direction. It's kind of like a tip-off from the cash buyers or sellers on what’s to come at the 3:50 imbalance. The ES traded 6046.50.

Today, we will get a look at what the Fed has to say about the economy and interest rates. Powell and the Fed have been fumbling around since they lowered 0.50 bps on September 18, 2024. On September 26, the ESU made its high at 5,797.25. That was the first mistake, instead of just lowering 0.25 bps while inflation was rising. Then they came back and lowered 0.25 bps on November 7, which was clearly questionable. And then the Fed lowered another 0.25 bps on December 18, 2024—and the markets tanked and have been out of kilter ever since.

The 3:50 imbalance showed $870 million to buy, and the NASDAQ showed $1 billion to buy with a strong 77% symbol lean to the buyside. Both popped and then dropped, and the NYSE imbalance flipped to $904 million to sell.

In terms of the ES’s overall tone, it had a hard time holding the rallies. In terms of the ESU’s overall trade, volume was 1.16M.

There will be no regular cash session tomorrow. Globex will run from tonight at 6pm until 1:00pm tomorrow. Friday’s Globex session will begin tomorrow at 6pm. So no trading or charts between 1pm and 6pm tomorrow.