Earnings and calendar on top. Last trade day of the month

Follow @MrTopStep on Twitter and please share if you find our work valuable!

Our View

It was another down open, sell-off, rally, and then reversal. I could call it a false start, but there’s little reason to expect anything different from the range-bound trading we’ve been seeing. As traders pull back and volume declines, the ES and NQ are increasingly susceptible to drops, especially around news events. Despite strong tech earnings, stocks aren’t getting bid up—they’re being sold.

Premarket Earnings: Companies reporting include Mastercard (MA), Stellantis (STLA), and Uber (UBER).

Aftermarket Earnings: Major reports expected from Amazon (AMZN), Apple (AAPL), and Intel (INTC).

MiM and Daily Recap

After Tuesday’s sell-off and rebound, the ES traded up to 5893.00 before selling off to 5861.50 at 9:15 am, following weakness in Europe, a $100 drop in Lilly, and weaker-than-expected earnings from CAT. The ES opened Wednesday’s regular session at 5886.25, down 16.75 points from the session’s open. After the cash open, the ES traded down to 5862.25 at 9:32, rallied 8.25 points to 5869.25, then sold off 23.75 points to 5845.50 at 9:44, and then rallied 37 points to 5883.00 at 10:42, continuing up 17.75 points to 5886.75 at 11:54.

After this high, the ES sold off 15.25 points to 5871.50 at 2:03, rallied 4.75 points to 5876.25 at 2:21, then dropped 21 points to 5855.25. It rallied back to 5870.75, then sold off 16.75 points to 5854.00 at 3:09. After a small rally to 5851.75 at 3:42, it reached 5860.00 at 3:44. It then traded down to 5864.50 and 5857.25 as the 3:50 cash imbalance showed $760 million to buy, which flipped to $1 billion for sale. The ES dropped to 5846.25 at 3:48 and traded at 5852.75 on the 4:00 cash close.

After 4:00, the ES sold off to 5840.25 following weaker-than-expected earnings from META, and MSFT dipped on weaker guidance. It rallied back to 5859.00, sold off to 5840.75, rallied to 5853.00, and then drifted down to 5844.50, settling at 5845.25, down 32.75 points or -0.56%. The NQ settled at 20,507.00, down 201.25 points or -0.97%.

In the end, it seems like the markets knew the earnings were going to be weak. In terms of the ES’s overall tone, the late sell-off erased the day’s positives. In terms of the ES’s overall trade, volume was in line with what we have been seeing the last few days at 1.258 million contracts traded.

How to read the MIM

Technical Edge

Fair Values for October 31, 2024 📉

Daily Market Recap 📊

Weekly Market Recap 📈

Guest Posts:

Dan @ GTC Traders

Win-Win In Front of Election Volatility
We stated last week that we were getting flat in our short-term trading book. This time-period in our portfolio exemplifies something we stated in the very first “Guest Post” here at Mr. Top Step’s Opening Print.

We run a multi-stat book of non-correlated strategies, which benefits us during periods of heightened volatility; which … the next trading week could very well prove to be with the coming U.S. Elections. Running a multi-strat (multiple non-correlated strategies) portfolio attempts to dampen the portfolio’s return volatility.

Upside and Downside Volatility
When newer traders hear of ‘volatility’ they usually think of the stock market heading lower or a ‘market crash.’ But that is not the true, quantifiable definition of what we mean when we speak of market volatility. Volatility has reference to the strength and degree of the variation in price … up and down; of any given asset. We often measure volatility by means of statistical indications like ‘standard deviations’ … or … the ‘variation of returns,’ or ‘volatility of returns.’

What if the market doesn’t head for a severe correction (downside volatility)? But instead begins to rally to an incredible degree (upside volatility)?

A multi-strat portfolio attempts to position itself to mitigate and smooth out the returns to benefit itself in any scenario. In other words, we look for ‘win-win’ scenarios’ to have smooth returns, using different types of strategies. We will outline how we are attempting to do this in the coming days.

Equity Fixed Income
One of the strategies we demonstrate at GTC Traders is an “Equity Fixed Income” strategy. We refer to this as an “Equity Fixed Income Hybrid Core” of 18 positions, weighted appropriately to the current macro environment. At the time of this writing? This ‘weighting’ is rather light as we are not overly confident in the ability of the market to sustain the rally it has already enjoyed.

That light weighting is one method to dampen any future downside volatility (market corrections). We can hedge this portfolio at any time. At the moment? This side of the portfolio is not hedged. We can hedge before the election, giving us, in essence, a ‘flat’ return. But what if, as happened in 2016, the market rallies to an incredible degree immediately after the election?

We can simply remove the hedge and enjoy the rally.
If the market rallies?
Good.
If the market falls?
The damage is mitigated by both the position weighting and any hedges we have placed.

Valuation Long-Short Trading
Another method we demonstrate is classic long-short valuation investing, with our own quantitative approach. At the moment, this side of the portfolio is only interested in short positions against the indices as they appear to our approach. But at the moment? We have no short position on in the market. So we have our own type of ‘Carry-Trade’ in place, adding basis points (a return) to the portfolio regardless of what is happening in the markets.

When a short opportunity appears? We take advantage of it. Until then? The Carry Trade benefits the account.
If the market rallies?
That’s okay. We’re still making money.
If the market falls?
Once the trigger for our Quantitative Process for shorting the Indices ‘fires off,’ we can take a short position.

Short-Term Trading
We also allow ones to view our ‘short-term trading’ processes that involve more discretion than quantitative approaches (though some quantitative processes do appear).

We had a small but profitable October. And as we stated in this article here, flat to no position is one risk mitigation and volatility mitigation technique.

Which we have employed.

We exited four or five profitable trades we had this month. We printed black, and now we will remain flat cash through the election.
If the market rallies?
Fine, we can make money after the Election fallout.
If the market falls?
Fine, we can make money after the Election fallout.
Until then, we are not exposed to overly volatile events.

Win. Win.
Until next time, stay safe … and trade well.

PTG Trading Room Summary – October 31, 2024

On Wednesday, October 30, the PTG trading room navigated a market characterized by bearish pressure and multiple resistance tests. The day began with a failure by bulls to hold above prior highs, triggering a “Look Above and Fail” pattern, which signaled a possible bearish setup. PTGDavid confirmed the Bear Scenario early, as price declined past the 5880 mark, hitting initial targets around 5860, confirming the daily trade strategy’s bearish bias.

The session’s key levels included the 5880 “Line in the Sand,” a critical resistance zone repeatedly challenged by bulls but ultimately holding firm. After an initial Open Range Short trade hit its first target, the 5845 midpoint offered strong support, prompting a shift to a long bias on dips. PTGDavid’s “BLT Long Trade” took advantage of this support, with notable guidance to reclaim 5855, which showed effective results.

Later, a solid buy response emerged, rallying prices close to 5880. Yet, persistent resistance in the 5880-5885 zone prevented sustained upward momentum, creating a high-volume “sandbox zone” where price oscillated throughout the afternoon. Multiple buy attempts failed at this level, reinforcing bearish dominance as the day neared close. A late-day market-on-close (MOC) sell imbalance of $1 billion cemented a weak market close in the lower quartile of the day’s range.

This session highlighted the importance of respecting key levels and adapting to prevailing trends, with traders seeing positive opportunities by trading both directions in line with these levels. The well-executed short and subsequent long trades on dip entries underscored effective strategy adaptation in response to support and resistance dynamics.

DTG Room Preview – October 31, 2024

Chart Reference: A detailed chart on the ES levels is available for review.

Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!