The S&P 500 futures down ticked on Tuesday’s contract close, then sold off on Globex into Wednesday mornings 8:30 open. Initially the ESZ16:CME ‘retested’ the overnight low, rallied a little, then made another new low at 2124.75, just prior to the 9:30 EIA. MrTopStep bought into that weakness, got stopped out, and re-bought again.
At 10:30 the futures had traded all the way up to 2140.00. At the lows of the day I put this out:
09:56:52 TRADINGDATA2: (driley) I think ES is at or near its early low
After making the high I put this out:
Dboy: (11:59:24 AM): I think we are at or near the early high
The S&P rallied 15 handles after I put that out, and sold off 13 handles after I posted the highs were in.
Late in the day the ES sold off down to 2127.25, rallied back above the vwap at 2132 to 2135.75, with the MiM showing $100 mil to buy. At 2:45 the cash imbalance showed $60 million to sell and the S&P traded to settle at 2133.75 down 4.75 handles on the session.
They say it takes a lot of skill to make money / maneuver around around in the futures markets. I agree, but I also think you have to have some street smarts and follow patterns. While I started buying at yesterday’s early low, I took some heat from some followers on the @MrTopStep Twitter feed.
As I have always said, that’s what makes a market. I think it’s going up and another trader thinks it’s going down. I understand that, and I appreciate other traders views, but I can’t change. If i get a feeling that selling is eclipsing, and that the ‘crowd’ is thinking lower prices, I look for a level to buy. You can call it a contrarian trade, or you can call it going with the algos.
The way I see it is, once the futures sell off and the markets look weak, the same programs that obliged the seller have no problem obliging the upside.The programs don’t care if the ES is going up or down. With that in mind it’s all about having an opinion, but it’s also about shuffling your feet and being willing to think outside what others think and how the markets act. With the price action as such, range bound combined with the up a day/down a day price action, I find it much easier to buy into a sell off on what should be an up day, or selling a rally on the down days.
I know this may sound stupid, but aside from the tools and indicators you use daily, I think it’s really important to not only have an opinion, but learn how to following the daily patterns and start using your ‘gut feel.’ Start thinking like the algos and go with them, don’t fight them.
November Top Performing DJIA Month in Election Year
From Stock Trader’s Almanac:
November begins the “Best Six Months” for the DJIA and S&P 500, and the “Best Eight Months” for NASDAQ. Small caps come into favor during November but don’t really take off until the last two weeks of the year. November is the number-three DJIA and number-two S&P 500 month since 1950. Since 1971, November ranks third for NASDAQ. November is best for Russell 1000 and Russell 2000 second best since 1979.
November maintains its status among the top performing months as fourth-quarter cash inflows from institutions drive November to lead the best consecutive three-month span November-January. The month has taken hits during bear markets and November 2000, down –22.9% (undecided election and a nascent bear), was NASDAQ’s second worst month on record—only October 1987 was worse.
November’s is a mixed bag in presidential election years. DJIA has advanced in 9 of the last 16 election years since 1952 with an average gain of 1.5%. Significant DJIA declines occurred in 2008 (-5.3%) and 2000 (-5.1%). For S&P 500 November ranks second with a similar record to DJIA. NASDAQ, Russell 1000 and Russell 2000 are not as strong ranking #8, #6 and #8 respectively. Fewer years of data (11 for NASDAQ and 9 for Russell indices) combined with sizable losses in 2000 and 2008 drag down rankings and average gains.
While You Were Sleeping
Overnight stock markets worldwide saw a sideways to lower trade both in Asia and Europe. The S&P 500 futures opened the overnight session at 2133.75. A low of 2128.50 was made late in the Asian session before rallying up to 2139 early in the Euro session. There was a move back down to 2130 followed by a rally up to a session high of 2140.25, up 6.25 handles. Currently, the ES is trading just five ticks off that high, with volume at 175K, very strong for 6:30 am cst.
Today’s session features some important economic reports. Globex volume has already been strong with a bit of back and forth price action. Bulls are fighting for 2150, and bears are fighting for 2125.
In Asia, 6 out of 11 markets closed lower (Shanghai -0.13%), and in Europe 6 out of 11 markets are trading lower this morning (DAX -0.09%). Today’s economic reports includes the Weekly Bill Settlement, Durable Goods Orders, Jobless Claims, Bloomberg Consumer Comfort Index, Pending Home Sales Index, EIA Natural Gas Report, Kansas City Fed Manufacturing Index, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 7-Yr Note Auction, Fed Balance Sheet, and Money Supply.
‘Water in the Bathtub’
Our View: The S&P can run, but it can’t hide, from the upcoming election. CNBC and its ‘talking heads’ can say whatever they like, but the bottom line is the investors have no desire for risk right now. In fact, as I said a few days ago, it’s quite the opposite. The trade fits the PitBulls analogy about the S&P acting like ‘water in the bathtub.’ The algos push it up one day, down the next, and never really go anywhere. In fact, the ESZ16 is trading 2139.00 on Globex at 7:00 am, and last Thursday the futures settled at 2136.75. The ES is going nowhere fast. This morning we have a decent amount of economic and earnings reports to get past. Our view; the ES is acting like it wants to go up, so we lean to selling the early rallies and buying weakness.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets closed lower: Shanghai Comp -0.13%, Hang Seng -0.83%, Nikkei -0.32%
- In Europe 6 out of 11 markets are trading lower: CAC -0.24%, DAX -0.09%, FTSE -0.03% at 6:00am ET
- Fair Value: S&P -5.92, NASDAQ -7.64, Dow -84.26
- Total Volume: 1.55m ESZ and 4.0k SPZ traded
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