Market Review
Topic: Taylor 3-Day Cycle
Author: David D Dube’ (a.k.a. PTGDavid)
Website: Polaris Trading Group
Tuesday’s Session was Cycle Day 3 (CD3): All markets managed to get a Positive 3 Day Rally for the Globex Session, however, most failed for the RTH Session. Range was 107 handles on 2.240M contracts exchanged.
…Transition from Cycle Day 3 to Cycle Day 1
This leads us into Cycle Day 1 (CD1): Markets may try to negate the failure by rallying early since the decline is already in place. As such, estimated scenarios to consider for today’s trading:
1.) Price sustains a bid above 4350, initially targets 4375 – 4385 zone.
2.) Price sustains an offer below 4350, initially targets 4325 – 4300 zone.
*****The 3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.
For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:
Link to access full Cycle Spreadsheet > > Cycle Day 1 (CD1)
Thanks for reading,
PTGDavid
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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.
Last Trading Day:
High: ~09:31
12:00 – 15:30 22% (wrong)
15:30 – 16:00 65% (wrong)
Low: ~13:02
09:30 – 10:00 73% (wrong)
12:00 – 15:30 23% (right)
Baxter appears to be more bullish than he should be. We need to train Baxter a bit more on end of the quarter market action.
Today:
High:
12:00 – 15:30 40%
15:30 – 16:00 58%
Low:
12:00 – 15:30 >90%
Chart of the Day
S&P 500 link to earnings is seen producing `speed bumps’
U.S. stocks “may hit speed bumps entering third-quarter earnings season” because profit estimates have become increasingly optimistic, according to Morgan Stanley Wealth Management. The firm cited the link between the S&P 500 Index and forward earnings, based on forecasts for this year and next, in a report Monday. Forward estimates for 2021 climbed 24% through Friday, beating the S&P 500’s gain of 19%, according to data compiled by Bloomberg. Estimates for 2022 rose 15%. Higher costs for supplies, labor and shipping, and potential corporate-tax changes pose risks for earnings, the report said.
Our View
The 10-year yield reached its highest level since June, putting pressure on the tech sector. In particular, FAANG got hit hard: FB closed down 3.7%, AAPL fell 2.4%, AMZN dropped 2.6%, NFLX sank 1.5%, and GOOGL gave up 3.8%. These stocks have a huge influence on the indices.
The ES rallied up to 4442 on Globex then sold off almost 40 points down to 4402.75 on the open. Less than one hour later, the futures had traded down to 4354, down roughly 88 points from the Globex high and down almost 50 points from the 9:30 ET open. In other words, bears had their way right from the start.
After the low, the ES rallied back up to the 4372 area, then made a sequence of lower lows down to 4334.75 at 2:06. After the low the ES rallied back up to 4356, slammed down to 4336, and then got jammed higher by a buy program.
After a few downticks and rallies, the ES traded all the way back up to 4372.25 as the MIM showed $1.2 billion for sale and then dropped 20 points down to 4352.25. After a small uptick, the ES traded down to 4346.50 at 3:48, traded 4343.50 as the 3:50 cash imbalance showed $2.8 billion to sell and traded 4343.75 on the 4:00 cash close. After 4:00, the ES traded in a 6-point range and settled at 4346.50 on the 5:00 futures close, down a whopping 86.50 points or 1.95% on the day, its worst one-day percentage decline since May. The Nasdaq futures settled at 14,786 down 426.75 points or -2.81%.
The S&P has risen seven straight months in a row, its longest such streak since the 10 straight months through January 2018. Short of a strong end-of-quarter rebound, that streak looks likely to come to an end, with the index down 3.4% for the month of September. In terms of the ES’s overall tone, it was extremely weak. In terms of the ES’s overall trade, 2.24 million futures traded.
In the end, it was a vicious trading day with very negative overtones. It’s like I always say: The S&P can take 1 or 2 bad headlines but when there are 4 or 5 negative things going on, it tends to be hard to overcome.
Our View
We really do live in a new world trading order. Yesterday it was clear to see the big accounts were rebalancing, selling stocks and more than likely buying bonds. With the government set to raise taxes, some of the selling could be tied to that also. I know that I did not call a big drop but I have tried to explain that something did not feel right, it felt weak.
I really think the wild swings are going to persist. Can the futures rally today? I guess they can but I think there are more dive bombs to come. I think we are heading for rockier times and still believe things will level off and rally hard at the end of the year. I need to look this up but I was thinking of buying the Jan 4800 calls and just risking “X” amount, but I want to see how the rest of the week plays out.
Our Lean:
The current downdraft is not out of the ordinary considering the weak seasonals and all the negative news. Our lean is for a bounce today. Buy the pullbacks and if we bounce, 4390 is the first real resistance level I am looking for. Above that is 4420.
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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