Mixed Stats After Positive Holiday Week

Commentary, News

The S&P futures (ESZ19:CME) closed at 3143.75 Friday, about 5 points below its opening print of 3143.75, after closing Wednesday at 3153.75. Its trading range (3139.50 – 3155.00) was quite boring and somewhat ominous for traders.

The downside gap between the all-time high set last week, coupled with a range bound lower close, suggest the markets are topping. Macroeconomic signals suggest, although lower, the potential to revive declines in the economy are quite real. With cross currents like this, we’ll trade elsewhere. 

Quick Friday Recap 

Last week was quiet, yet positive, for the S&P 500 futures (ESZ19:CME).

The ES futures opened Friday’s shortened holiday trading session at 3147.50, traded up to a high of 3150.25 at 9:05 CT, and then made a sequence of lower lows down to 3143.75. From there, the futures rallied up to a ‘triple top’ at 3147.25 before selling off down to 3139.50 at 11:55. 

After the low, the ES rallied up to 3145.25, and settled at 3143.75, down -10 handles on the day. 

In terms of the days overall tone; the ES just couldn’t hold a bid, and drifted lower most of the session. In terms of the days overall trade; a total of 853,000 futures contracts traded, with 149,000 coming from Globex, making the total day volume 704,000. 

Soybeans and Natural Gas, with charts from a different source, gives you a hint at what we look at over each and every weekend.

Natural Gas

It looks like this winter is going to be quite normal. That doesn’t bring a whole lot of enthusiasm to the pits, or those looking for increases on the buy side, but that can change. Snow, to the exclusion of not being able to service the pumping and transmission stations, doesn’t have any great effect. What they’re taking out of the ground is more than sufficient from a supply standpoint; probably more sufficient than will be required to get through the winter. That’s why we’re looking for a series of lower lows, perhaps as low as we saw four to five years ago (mild winter followed by further merger consolidation in the production segment).

While we rely upon charts like this every day, we only show them to you when it’s time for a move to test longer term bottoms and tops. Remember, commodity contracts reflect supply and demand. When there’s far too much supply, prices tend to move lower. When prices decline over the longer-term, corporate leaders merge their entities into each other simply to survive. That time is upon us in Natural Gas. We’re still looking for a bottom to buy. We’ll be patient as our targets revolve around the prior lows of four to five years ago.

Soybeans

On the trading side, we’re long a total of 15 soybean contracts, at an average price of 887.50. We’ll buy 30 more if the price drops further. Soybean farmers are really quite smart. Plantings for both wheat and soybeans dropped (over 5% for soybeans), which adds fuel to the fire for when “China” trade issues are resolved. When supply gets tighter in March / May, and the demand exponentially grows, the effect of fewer plantings will take hold with “teeny beanies” being the final result; higher prices will prevail.

As we did for Natural Gas, here is the longer-term chart for Soybean futures. A return to the 800 level is possible, but it will be short and sweet if it does. It’s nice to be a buyer at the lower end of a long-term price chart. You are not the only ones watching this price movement, the big boys are as well, and they will most certainly take advantage and reload their inventory at lower prices.

We’re getting close in being able to enhance what we provide for you on a daily and ongoing basis. Keep emailing me at david@amstradinggroup.com and let me know what you want me to highlight and teach when time allows. In the interim, thanks for reading what we post, and enjoy your trading week.


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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 (3299 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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