Late Headlines Kill The Rally

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Index Futures Net Changes and Settlements:

Foreign Markets, Fair Value and Volume:

• In Asia 11 out of 11 markets closed higher: Shanghai Comp +1.67%, Hang Seng +1.65%, Nikkei +0.54%
• In Europe 12 out of 12 markets are trading higher: CAC +0.62%, DAX +0.92%, FTSE +0.65%
• Fair Value: S&P -0.42, NASDAQ +8.69, Dow -32.33
• Total Volume: 1.7mil ESM, and 1.2k SPM traded in the pit

Today’s Economic Calendar:

Today’s economic calendar includes Robert Kaplan Speaks 4:30 AM ET, NFIB Small Business Optimism Index 6:00 AM ET, PPI-FD 8:30 AM ET, Redbook 8:55 AM ET, Wholesale Trade 10:00 AM ET, and Raphael Bostic Speaks 6:30 PM ET.

S&P 500 Futures: #ES Rips, Just Can’t Hold The Rally, MOC Sell $1.4 Billion

Monday’s trade started with the Asian markets mostly higher. Hong Kong’s Hang Seng Index closed up +1.3%, and the Nikkei closed up +0.50%. In Europe, the Stoxx 600 was modestly higher.

A more conciliatory stance by the Trump administration officials threatening to impose new tariffs on China led to a better tone In the US. The S&P 500 futures that settled at 2604.50 on Friday, down -57.25 handles, rallied up to 2628.25 around 4:30 am CT on Globex. On Monday’s 8:30 futures open, the ES traded 2618.50, pulled back down to 2613.50 10 minutes after the open, and at 10:20 am traded all the way up to 2639.75, up +34.75 handles, or +1.33%.

The next move was up to 2643.75, and then up to 2648.75. After a small pullback, the futures rallied up to 2654.00, up +50 handles on the day. After the high the, ES sold off down to 2625.00, as the MiM went from $360 million to sell to $966 million to sell. On the 2:45 cash imbalance reveal, the MIM sell side increased to over 1.3 billion to sell, and the futures traded down to a new daily low of 2610.25 at 2:59. On the 3:00 cash close the ES traded 2613.75, and went on to settle at 2618.75, up +13.00 handles or +.50%, 35.00 handles off the high.

In the end, the bulls won, but the late day give back was another great example of the ‘failed rally’ pattern I have been talking about. Everything was going their way, until a few late headlines hit the tape. The first one came at 2:55 and said; FBI raids office of Trump’s lawyer Michael Cohen – New York Times – Said to seize records related to several topics, including payments to Stormy Daniels – Search does not appear to be directly related to Mr. Mueller’s investigation, but likely resulted from information he had uncovered and gave to prosecutors in New York.

The next headline was: The F.B.I. also seized emails, tax documents and business records; the seized records include communications between Mr. Trump and Mr. Cohen.

This is exactly what I have been warning about!

^{Colors within the report: Green is always the 200 period (day, week, etc.). Red is always 21, Blue = 50, Brown= 100,  Yellow is vwap.  *Stars have more emphasis, meaning 2 or more technical pts line up.}

EQUITIES: 

ESM turned sharply lower yesterday from its s/t .786 resistance, pulling back to the .618 retrace from Friday’s low around 2611.  Gained momentum overnight back above the 2628 pivot and traded above the 2653.50 key. This level will remain key today during the day session today (SPX). The vwap from the March high is 2667 and a settle above it would be positive for upside momentum shift.

This is long ES vs short USM and the short term trend line has been very pivotal, not only in the pair, but for ES in general. Failure here and we look for equities to roll over again. A clean breakout above this trend line would signal upside momentum potential in the index.

Buy / Sell / Don’t Fall In Love with Your Position

Our View: Remember, the trend is your friend, and right now that trend is all part of the headline news algos, and all the failed rallies. After rallying all the way up to 2654.00, the ES sold off all the way down to 2610.00, 44 handles off the high. While the S&P may have already reversed when the headlines hit the tape, it’s my guess that some people get the news earlier. It’s how the game is played. In addition to the two headlines, Trump said he will make a decision about the Syrian chemical attack late yesterday. It’s a crazy world we live in. The feds go after Michael Cohen emails related to several topics, but the don’t bother going after Hillary’s Clinton’s subpoenaed 33,000 missing emails! How does that work?

Our view is that we think you need to expect the unexpected. When the ES looks terrible, you have to stick your neck out and buy it. When the ES looks great, you have to sell it. We lean to buying the early weakness and selling the rallies. As long as there is so much turmoil, it’s going to be hard for the ES to hold any sustained rallies.

Market Vitals Technical Analysis for Tuesday 04-10-2018

[gview file=”https://mrtopstep.com/wp-content/uploads/2018/04/Market-Vitals-18.04.10.pdf”]

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.}