Market Review
MrTopStep: For Traders, By Traders
The S&P futures (ESC20: CME) closed on Friday at 3234.85, a few points below its opening print of 3226.36, after closing Thursday at 3257.85. Its twenty-four point trading range (3224.34 – 3246.15) gave traders reason to be involved thanks in part to the turmoil in the Middle East.
What the market did give us on Friday was a downside support level. Several attempts to break through the 3215 level brought the buyers back to the table. A forty-point trading range between the all-time-highs and the 3215 level should provide guidance.
A shout out to Danny for being right all the way up from the 3000 level calling for a short at the top. Everyone who participates in writing dialogue on the MrTopStep side brings something to the process. Without Danny’s insight and platform, many would remain unknown to the masses. We at AMS suggest you start your relationship with IMPRO and MiM. I’ve got 50+ years trading commodities and have learned quite a bit from everyone, thanks and best wishes for a happy and healthy new year.
New schedule for authorship of the Market Review:
Monday: David Zimmer – AMS Trading
Tuesday: Rob – Discovery Trading Group
Wednesday: David Dube – Polaris Trading Group
Thursday: Gagan Daphu – ES-Zone
Friday: Keith Gallagher – Wyckoff Trader
Bonus Market Review – Danny Riley:
GLOBEX
High 3263.50
Low 3206.75
Volume 470,000
Day Session 1/3/2020
Opening Print 32
High 3246.25
Low 3220.75
ES Settlement 3235.25, down 0.80%
Total Volume 1.46 million
#ES TANKS: Iran Missile Strike Act Of War
Everything was quiet during Thursday night’s Globex session until President Trump ordered a missile strike that killed Qassem Soleimani, Iran’s top military leader and head of the Quad Force. The S&P futures (ESH20: CME) were trading near the highs of the night session at the 3263 area when the headlines hit. The strange thing, the ES didn’t react right away. I personally sold 3262.50 and while the future did downtick it took several minutes before the futures actually started to get hit. As more headlines hit oil and gold started moving up and the ES started to sink. By the time I went to bed the future was traded way down to 3229. At 4:57 CT the ES traded down to the Globex low at 3206.75 and then it started to short cover and traded 3221.25 on the 8:30 CT futures open.
After chopping around the ES sold off down to down to 3220.75, rallied up to the 3239-40 level, sold back off a few times down to the 3231-33 area and then, after some back and fill, I put this out in the chat : IMPRO: Dboy :(11:47:33 AM): back to the 40.00 level, stops above IMPRO: Dboy :(12:42:37 PM): 45-46 should be it and around xxx the ES started to take out the buy stops above 3240 and made its high for the day at 3246.25.
At 2:30 the ES was trading 3238.25 as the MIM flipped from over $500 million to buy to $285 million to sell, traded 3237.00 as the final 2:45 cash imbalance showed $285 million to sell, traded 3235.50 on the 3:00 cash close and settled at 3235.25 on the 3:15 futures close, down 26.25 handles or -0.80% on the day.
In the end, the overall tone of the ES was very firm. In terms of the day’s overall volume, 1.46 million futures traded.
Economic Calendar
Closing Prices
In the Tradechat Rooms
The MiM
Friday, despite the scary news, the market held up pretty well. No mass exodus across the Sinai quite yet. We started up with a buy that swung into bear territory leading to the 3:50 pm ET reveal. Easily paired down for an orderly imbalance close.
Our View
2020 Starts Out With A BANG!
When you are looking for why the ES has rallied so much from Christmas eve to Thursday here is your answer.
Hedge Fund Telemetry says asset managers bought +$30 Billion of S&P 500 contracts as of 12/24 (released on 12/30. Next update from CFTC will be on 1/6 and will represent data till 12/31), increasing net long positioning to +$170 Billion. This is the largest net long position (in US Dollar notional basis) and close to the largest in terms of contracts held long (+1.051 million contracts). Net Long positioning is near or at the 100th percentile on all measures. The prior peak was on 23rd January 2018 (+1.053 million contracts or only 2,000 contracts more) and translated to +$150 Billion in net notional terms. The difference is because the S&P 500 is higher now. The weekly increase in net long positioning (+$30 Billion) was also the largest weekly increase in data going back to 2010. AND ANOTHER ONE… We had SIGNIFICANT longs added Thursday and now ~12B offside. E-mini & Regular S&P 500 futures, open interest increased by a notable 1.2 z-scores ($7.1 billion notional, 43.4k contracts, 1.5% of total open interest) on Thursday. Price action was indicative of new longs being added. This is the largest one-day increase in longs, outside of the roll, since November 25th, 2019 (where we saw $7.6 billion notional, 48.7k contracts, 1.7% of total open interest of new longs added). Friday morning’s sell-off has seen $12.2 billion notional (2.6% of total open interest) of recent longs caught “off-side” in the S&P 500 future.
I thought 2020 was going to be a wild year but the US / Iran situation is going to spell a large uptick in volatility and death. There is little doubt that Iran will hit back hard at a time and place of its choosing and on multiple fronts. I don’t think Iran wants a direct confrontation with the US but the Middle East is a ‘target-rich environment’ (Saudi Arabia or the UAE?). If it does want an all-out war with the US the first thing it would hit would be the home to US naval forces central command, the US Fifth Fleet in Bahrain and Israel. With terrorist cells around the world, ‘soft targets’ would be the best way to wreak havoc around the globe. This is not an if, it’s when!
With the US enjoying one of the firmest economies in the world and the S&P up 475% from its March 2009 credit crisis low and the Fed doing a balancing act, even a cyber attack could cause huge problems for the US stock market. Yes, the Dow dropped 1,000 points during the May 6th, 2010 Flash Crash, yes the S&P dropped 21.5% in October 1st of 2011, yes. the Dow fell 1,399 points from August 18th to the 21st 2015, yes the S&P sold off during the China stock market correction in January of 2016, and yes the S&P corrected 10.73% from 2930 down to 2351 by Christmas Eve in 2018, but none of this will even get close to what will happen when a war with Iran breaks out. The Iranians would love to sink an aircraft carrier and they have the tools to do it. I do not think I am getting carried away with my thoughts. The US and Iran had been battling for 67 years when the US and the UK orchestrated a coup d’état, the overthrow of the democratically elected Prime Minister Mohammad Mosaddegh in favor of strengthening the monarchical rule of Mohammad Reza Pahlavi on 19 August 1953.
Our view, as I said, at the time of its choosing Iran is going to hit back and when it does the stock market will sell off hard. If by chance the US and Iran go to war the S&P will crash. As I have said many times, the S&P hates uncertainty and clearly there is an abundance of that. I said on Periscope over two months ago to get long crude oil and gold and I still feel that way. I am not saying to just go flying in and buy them but I am looking to buy a pullback or look at buying some calls 6 months out. As for the ES, I think being cautious or adding some protection may be in order. You can take it from there…
PitBull: CLG osc 10/17 turns down on a close below 6108, ESH osc 12/26 turns up on a close above 3240.33, VIX osc 5/-4turns up on a close above 1456
Market Vitals Technical Analysis
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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