Market Review
Individuals have rights, Governments have Limited Power. That’s all I got the say about that topic. I’m a little heavy hearted tonight, Shock G straight up gangster Mac was found dead. In his hotel. Today was Earth Day, and possibly the end of capitalism.
A 33-year-old invested his saving of $180,000 in dogecoin and became a millionaire. My hairstylist invested $5,000 and made $20,000. And last week I mentioned China and Russia were working to unpeg the US Dollar. Oh, today was earth day. The goal is to be a carbon-free planet by 2050. And botnets are hacking computers to use their processing power to mine for cryptocurrencies.
May you live in interesting times, indeed! (A Chinese Curse)
You can’t make this stuff up…
The last two days have been trading like clockwork. Yes, yesterday was a bit aberrant. If you were looking at the tape you might have seen it coming. For example, ESM21 opened at 4144 a 10-minute opening drive swing downward to 4151. A 20-minute rally swings price 6 points up to 4157. Buying power is greater and more sustained than selling power. Demand is, therefore, greater than supply.
The next downswing lasted 5 minutes and carried price to a lower level at 4149 spring. The next rally lasted 10 minutes and carried price to a higher level than before, 4159. Then a downswing for 5 minutes retraced less than half the upswing as price found a bid at 4153.
This is a confirmation of strength. Looking at the 4155 level the trader can see a base of potential accumulation of 60 minutes. On my one point and figure chart, I can see three waves (10 to 16, to 21) with a potential move up to the 4162, 4166, and 4170 levels.
At 10:30, price started on its upward track, putting in higher highs and higher lows. A push up to 4162 fulfilled the first objective as professionals seem unwilling to lift the offers as the activity drops off and price trades in a narrow 2 point range. Then a push up to 4166 fulfills the second objective.
Price traded in another 2-point range and just after the PEON close, the final push-up found the last objective of 4170 handle around 1:30. A grind to 4171 on little to no activity. The POTUS said, “Eat the Rich” by declaring doubling the capital gains tax rate, and the market went to someplace in a handbasket or as WB would have said; “Threw Momma from the train” and the rest is history.
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Looking Forward Friday, April 23, 2021
Yesterday, we put in an unfair high and an unfair low and traded somewhere in the middle. From 13:45 to 14:00 price cut through bids like a hot knife cuts through butter. At the 4115 as a bid came volume started to increase as price held the bid. Total volume for the day 1,790,000 could have indicated a potential selling climax.
Currently, Globex is working out the Automatic Rally. That means that price needs a secondary test. It does not have to test at the 4115, It does, however, need to make some type of effort in the CASH RTE secession.
I consider myself fortunate to be able to keep WB’s Memory and Trading Legacy alive today. For traders now and in the future who will benefit from his savvy wisdom and trading techniques. I really do feel that the clock can separate you from where you are now to where you want to be.
But, it’s is NOT EASY TO LEARN!!!
Most folks/traders who subscribe and never contact me fall by the wayside. And some who I’m still friends with still can’t’ get it! It’s not easy. But it’s worth the effort.
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Chart of the Day
GMTT / Chart of the Day / Bitcoin (BTC/USD) / April 23, 2021
Bitcoin (BTC/USD)
On April 16th GMTT reported that Bitcoin was trading in a tight range and that Bitcoin elects a sell signal below BTC/USD 60400. When the sell signal was elected we gave different lower targets and the last one was given last Wednesday, which was a downside target of 47688. That target was reached this morning, just in a couple of days Bitcoin lost over 20% off its value in just a few trading days! The short-term range for Bitcoin is wide: 43604 – 52175. Traders that are short the Bitcoin should use our suggested buy stop at 52900.
Have a successful day and an amazing weekend!!
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Our View
S&P 500 Futures Recap – Trade Date April 22, 2021
Biden’s “Doubling Capital Gains Tax” Sends Stocks Lower
The S&P futures were chopping around when the headlines started to hit: President Biden is considering nearly doubling capital gains taxes on the wealthy.
Currently, the US capital gains tax is 20%, but Mr. Biden’s plan is to raise it to 39.6% for the wealthiest of the bunch. At the time the major indexes were flipping from small losses to small gains, but after the headlines hit the tape, the S&P futures (ESM21:CME), the Nasdaq futures (NQM21:CME) and Dow futures (YMM21:CME) all closed down 0.9%.
While the discussion of tax increases is nothing new, the headlines about large increases in the capital gains tax spooked the markets. The one-hour ES bar chart showed over 500,000 e-mini contracts traded after the news hit. We have not seen anything like that spike in months and yesterday’s 1.9 million contracts traded was the highest volume in several weeks.
In most cases, shake-outs are a good thing — especially going into today’s week-3 options expiration. In most cases when the S&P drops like that, people add protection, roll lower, or get short at low prices.
If the S&P starts going up tonight and goes up after the 9:30 ET open, there will more than likely be an upside short squeeze. And if the ES is at or near its highs at 2:30 ET we will be looking for a late Friday rip.
The Biden headlines about doubling the capital gains tax were a short term blip. In terms of the ES’s overall tone, it went from OK to horrible back to a somewhat firmer close. In terms of the day’s overall trade, it was busy.
Our view: we have a pretty good track record for calling the Friday rips and that’s what I’m doing now. All the income tax headlines did was add shorts to today’s options expiration. Yesterday, SNAP and INTC reported good earnings. Our lean: is for higher prices. You may be able to sell the early rallies, but I’m long 4 ES and my game plan is to try and hold the position. If I am correct, 4155-4160 is my first upside target.
As we all know, there’s no crystal ball when it comes to trading stocks, options or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk free for 30 days.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
As always, please use protective buy and sell stops when trading futures and options.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Decisions to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
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