Hurricane Trump, High Wind Ahead

Commentary, News


Index Futures Net Changes and Settlements:

ContractSettlementNet Change+/-%
S&P 500 (ESU19:CME) 2980.75+8.75+0.29%
DowJones (YMU19:CBT)26,808+107+0.40%
Nasdaq 100 (NQU19:CME)7,857.75+2.25+0.03%
Russell 2000 (RTYU19:CME)1505.00-2.00-0.13%

Fair Value:

  • Fair Value: S&P +0.38, NASDAQ +2.12, Dow +7.86

*As of 7:00 a.m. CST

Today’s Economic Calendar:

3 PM ET, Consumer Spending


S&P 500 Futures: Quiet Grind Up:

After selling off down to 2969.50 late Thursday and closing at a 6 dollar discount to the S&P cash, the futures rallied all the way up to 2988.25 on Globex Friday morning and opened at 2980, up over 9 handles on the day and immediately sold off down to 2972.25 at 8:45. After the low the ES rallied up to 2980.75, sold back off down to 2976.25, made a lower high at 2980.25, sold back off to 2975.50 at 9:17 and then rallied back up to 2984.25. After the push the ES sold back to 2975.75 and then popped up to a new daily high 2985.75 going into 12:30 CT. 

In the end, it was a quiet trading day. After all the drops over the last few weeks, the sellers came back in force with the news that the US and China had agreed to resume trade talks in October. They caught the shorts and in came another big “short squeeze”. I can’t speak for everyone but that’s how I believe the price action works. The algos know when everyone gets off base and then move the other way. I also believe… barring another negative Trump tariff Tweet that the S&P futures (ESU19:CME)  are getting ready to take out the 3000.00 level and blow through the old high at 3029.50.

Late in the day, the ES pulled back down to 2981.25 as the MiM started to show $250 million to sell and then traded back up to 2985.00 at 2:30. After the 2985 print the ES sold back off down to 2980.75. On the 2:45 cash imbalance the ES traded 2980.50 as the final MiM showed $230 million to sell. On the 3:00 cash close the ES traded 2979.50 and then settled at 2980.75, up 0.37% on the 3:15 futures close. In terms of the market’s overall tone, it feels like new highs to me. In terms of the day’s overall trade, only 1.1 million ES futures traded, somewhat on the low side.


MiM: Imbalance Meter

Time14:014:2014:3014:4014:5015:0015:1015:2015:3015:4015:4015:5016:0016:07
Total-71-187-209-229-225-248-278-272-249-230-230259-88-88
Buy1644384474284353963853844084184181189278278
Sell-235-625-656-658-660-644-663-656-657-648-648-930-366-366
$%-59-59-59-61-60-62-63-63-62-61-6156-57-57
#%-55-53-53-53-54-56-57-57-57-56-5663-52-52
Syms150311310312316313315315313314314642611611

The MIM on Friday was a slow build to the sell-side from 2 pm ET until the obligation cutoff time of 3:50 PM ET where it flipped from -230M sell to a 259M buy. Still small. I took a small short trade at the 3:30 pm time, since that was the setup time the day before. I did get paid, but not because of this anemic sell imbalance. Watch that 3:30 PM time again today for a reversal.


China Exports Shrink

Our View:

Short and sweet: the ES is going up, barring some crazy tweet by the Trumpster! There remain gigantic obstacles to a US-China trade deal. While the two countries will meet in Washington and October there is little chance to narrow the differences. Everything from market access to intellectual property is going to be impossible to overcome. While I don’t think Trump will blow things up before the meeting the big issue right now is the four-month-long protest in Hong Kong are starting to heat up. I don’t know that it’s going to be a market-moving event right now but if China starts to do a major crackdown the headline news could be a negative for the stock market.

Our view is for higher prices. That doesn’t mean the S&P won’t pull back but I think it’s possible we see new all-time highs this week. Our lane is to buy the pullbacks.

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. Any decision 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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Danny Riley (3132 Posts)

Danny Riley has worked in the futures and options industry for 38 years, including the CBOT’s bond room, where he worked for several of the Market Wizards. He went on to build the largest volume desk in the S&P 500 Index Futures, serving some of the largest banks and hedge funds, the UBS program trading business, and some of the world's top individual traders. As a leader and co-creator of the MrTopStep IM-Pro Trading Room, he shares trading ideas and breaking market news live from the floor with our other professional traders and new traders eager to experience the power of collective intelligence. Join us today and get the edge only social trading can give you.


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