Market Review
At the end of the day, it was another slow day on the list of many recently. Welcome back to late-August trading. Fund managers and traders are busy cramming in their end-of-summer vacations and family time before we turn the page to September and as the new school years are starting up.
The ES opened at 4485, traded down to 4480.75 at 9:36, rallied and made a few higher lows, and traded 4488.50 at 10:15. Just after 1:30, the ES started running a buy program that pushed the futures all the way up to 4497.25. After a small pullback to the 4493 level, the ES made a lower high at 4496.50.
Total ES volume at 2:30 ET was 550,000 contracts. At 3:13, the ES traded 4493 and the early MiM showed $498 million to sell. The ES pulled back to the 4492 level as the MiM went to over $600 million to sell and popped again when the MiM went to $1.2 billion to sell at 3:36.
At 3:57, the ES traded up to a new high at 4498 and pulled back down to the 4494 level just before the imbalance. The ES traded 4495 on the 3:50 cash imbalance showed $958 million to sell, traded 4492.25 on the 4:00 cash close, and settled at 4493.50 on the 5:00 futures close, up 10.50 points or 0.23% on the day.
In terms of the ES’s overall tone, it was firm from the get-go and closed at its 51st record high close. In terms of the day’s overall trade, volume was painfully low at 762,000 contracts. That has been the theme this week, following Tuesday’s low-volume action.
Economic Calendar
Closing Prices
In the TradeChat Room
Market On Close: -$959M to sell. Is anybody watching?
We are starting to accumulate selling into the end of August. Yesterday’s MOC makes that five out of the last six days we had negative MOCs.
Check out all the Market Closing action in our daily post
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Baxter
Baxter is our new AI trading helper. This data is early, new, and not very well tested but we want to share some of our findings. We are concentrating on the SP500 which should benefit ES futures and SPY traders.
Baxter made a trend-day-like call yesterday with the low coming in at the open and the high around the close.
Baxter has four bowls to drop his bone in for the day’s prediction on high and four bowls for the lows. The first bowl is 09:30 until 10:00, the second is 10:00 until 12:00, the third bowl is 12:00 until 15:30, and the fourth is the last 30 minutes from 15:30 until 16:00. These times are picked because each span historically has about a 25% chance of hosting the high or the low of the day. So random choice would be correct about 25% of the time.
For today, Baxter is really undecided about the lows. He is showing 30% for the first time slot, 29% for the 2nd. That has him 59% convinced it will be an AM low. The two afternoon slots are 23% and 16%, respectively. That may not be too much help. He is 78% convinced that the high will come in the last 30 minutes.
Chart of the Day
Drop in borrowing to buy U.S. stocks makes BofA cautious
July brought the first decline in borrowing to buy U.S. stocks since a bull market began last year, according to monthly data compiled by the Financial Industry Regulatory Authority. The drop in margin debt is “potentially bearish” for share prices, according to Bank of America Corp.’s Stephen Suttmeier, a technical research strategist. Suttmeier raised the possibility in a report Monday that looked back on the S&P 500 Index’s performance after peaks in margin debt since the 1920s. Borrowing soared 84% from April 2020, when the streak started, through June before dropping 4.3% last month.
Our View
This has really been a long-or-wrong type trade and despite what the PitBull thinks, I still think there is more upside coming. There is no doubt the lower volumes have been favoring the upside. Yesterday the ES fell 2.75 points off ES 4500, but if today is anything like yesterday I think my 4520 upside objective will be met.
Our lean is the same as yesterday: You can sell the early rallies and buy weakness or just be patient and buy the pullbacks. Some think Fed Chairman Powell will shy away from making any taper comments Friday when he speaks. While I am not 100% sure about that, the markets are clearly siding with a more dovish statement.
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As we all know, there’s no crystal ball when it comes to trading stocks, options, or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk-free for 30 days.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
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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