Bulls Try to Go 5-for-5 This Week

Jobs data came up light

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Our View

There is no denying this rally right now. While I may not think the worst is over, the other side of this is the current low and how fast the S&P rallied off it.

I have talked about the overloaded shorts and that many had not covered, but over the last two days, there has been a significant amount. Today is the jobs number and everyone keeps talking about a shrinking economy and a recession, but so far, we have not seen it in the jobs number.

However, we finally saw some of that this morning, as the number came in light and the unemployment rate ticked higher (up to 3.9% from 3.8%). Alongside the jobs number, it’s the week one FRyday options expiration…which as we all know adds its own dimension to the overall price action.

Our Lean

This is from the MrTopStep Trading Rules 101 for Jobs FRYdays. I don’t know if this will work today, but if it does work, it can be quite profitable.

COUNTER-TREND FRIDAY: Over the years this trade works best on monthly NFP jobs Friday when the S&P futures gap sharply higher or lower on oversized pre-market Globex volumes of +350k ES contracts before the 9:30 am CT open. This is a fade, “the bus is too full” type trade.

Example: The S&P is down 6 handles at 6:00 am and then down another 10 or more handles after the jobs number is released. Now, the S&P is down 16 handles or more at the 9:30 am open. With 350k+ minis traded before the open, this tells us that traders have already voted (sold). Depending on the price action, the idea is to buy a sharply lower open or the first drop after the lower open.

The idea behind this is that with so many minis traded and it being a Friday and knowing most traders can’t hold the futures over the weekend, they put in buy stops and the algorithms go right for the buy stops. With all the selling used up pre-open, the ES will start to short cover into the buy stops that lift the offer side of a buy program.

MrTopStep Trading Rules 101

Sometimes these gap trades turn into trend days. Personally, I like buying the gap down opens BUT it’s also a weekend amid the ever-expanding Gaza risk.

Lastly, I think I said something about this in my chat. A guy who runs the risk department at a larger futures broker said in the last two months they have blown out more accounts than they have all year — combined.

As I have said many times, things are very fluid and can change in 1 second. Use stops and don’t let your losses run.

Areas of interest: I always liked Jeremy Grantham and followed him extensively when he headed up GMO. He is one of those people that has made some very big and correct predictions and this is his latest.

‘Don’t invest in the US’: Jeremy Grantham issues warning over American stocks, saying S&P 500 could crash by over 50% if ‘a couple of wheels’ fall off — here’s where to look instead.

For those of you who like HandelStats levels, here they are:

Upside: Trade and hourly close above 4336.25 targets 1 sd at 4363.65. Hourly close above 4364.25 targets 4384, then 2 sd at 4393.79. Hourly close above 4396 targets 4403.38, hourly close above there targets 3 sd at 4423.94. Caution: no resistance on the upside today.
Downside: Trade and hourly close below 4332 targets 4314.60, then -1 sd at 4303.35, then 4299.62. Hourly close below there targets 4280, then -2 sd at 4273.21. Below there targets 4267.25, hourly close below there targets -3 sd at 4243.06.

MiM and Daily Recap

ES Recap 15-min

The ES rallied all the way up 4308.75 and opened Thursday’s regular session at 4294.00. After the open, the ES rallied up to 4308.75, traded down to 4296.75 at 9:45, did a small sideways back-and-fill and traded up to a lower high at 4306.00, dropped down to 4295.75 at 10:15, and then popped up to 4222.00 at 11:01. For the next 90 minutes the ES back-and-filled and then rallied up to 4334.75 at 1:55, pulled back to the 4325.50 level and started to uptick slowing.

After 2:00 the ES went dead, consisting of small 3 to 4 point back-and-fill ranges, while the NQ — that’s up 240 points — is struggling to maintain a bid. After the 4325 print, the ES slowly moved back up to the 4234 level at 3:38 and then traded up to 4336.50 at 3:40 as the early MIM showed $208 million to buy. The ES traded 4345.50 as the 3:50 cash imbalance flipped to $1.4 billion to sell and rallied up to 4337.75, then traded 4335.25 on the 4:00 cash close and settled at 4333.25 on the 5:00 futures close, up 79.75 points or 1.87% on the day.

In the end, the ES has rallied more than 200 points so far this week. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was steady: 320k traded on Globex and 1.379 million traded on the day session for a total of 1.698 million contracts traded.

Technical Edge

NYSE Breadth: 89% Upside Volume (!)
Nasdaq Breadth: 79% Upside Volume
Advance/Decline: 88% Advance (!)
VIX: ~15.25
- Down almost 30% this week

ES

Levels from HandelStats.com

ES Daily

Upside: Trade and hourly close above 4336.25 targets 1 sd at 4363.65. Hourly close above 4364.25 targets 4384, then 2 sd at 4393.79. Hourly close above 4396 targets 4403.38, hourly close above there targets 3 sd at 4423.94. Caution: no resistance on the upside today.
Downside: Trade and hourly close below 4332 targets 4314.60, then -1 sd at 4303.35, then 4299.62. Hourly close below there targets 4280, then -2 sd at 4273.21. Below there targets 4267.25, hourly close below there targets -3 sd at 4243.06.

NQ

NQ Daily

Upside: Trade and hourly close above 15042.08 targets 15106.25, then 1 sd at 15126.70. Hourly close above there targets 15155.25, then 15186 and 15216.75. Hourly close above there targets 15247.50, then 2 sd at 15273.41.
Downside: Hourly close below 15033.25 targets 4:15 settlement at 14980, then 14957.25. Hourly close below there targets 14879, then -1 sd at 14833.30, then 14805.25. Hourly close below there targets -2 sd at 14686.59.