Tuesday’s Session was Cycle Day 3 (CD3): ES rallied continued unchallenged by the bears, fulfilling CD3 upper penetration objective (4506), settling 2 pts off high of day. Range was 46 handles on 982K contracts exchanged.
…Transition from Cycle Day 3 to Cycle Day 1
This leads us into Cycle Day 1 (CD1): Price momentum may take price higher before the decline begins, the average measuring 4488. Bulls have strong momentum, so it is theirs to lose. Primary trade has been and remains buying the pullbacks to key support zones. As such, estimated scenarios to consider for today’s trading.
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U.S. Oil Fund shows challenge facing Bitcoin futures ETFs
U.S. exchange-traded funds investing in Bitcoin futures may struggle to track the digital currency’s performance over time, if past precedents are any guide. Take the United States Oil Fund, which invests in crude futures, as an example. The ETF seeks to have an average daily percentage change that’s within 10% of the comparable move in benchmark oil contracts over 30 trading days, according to its prospectus. Monday’s close was about 90% lower than the first-day price in April 2006, according to data compiled by Bloomberg. West Texas Intermediate crude rose 20% in New York trading during the same period.
The ES opened Tuesday’s regular session at 4493.50, working on its fifth straight day of gains. The bulls didn’t disappoint, jamming it higher again on the day.
While the ES wobbled a bit in the opening 30-minute range — with a high of 4497.25 and a low of 4487.25 — the index eventually resolved to the upside. In the early afternoon, the ES eventually hit a high of roughly 4510, before pulling back to a low of 4500.50 at 2:30.
The bulls took over from there, running it higher into the close. The ES closed at 4511.75 at 4:00 pm and hit a high of 4517.50 at 4:30, before settling at 4515.25 at 5:00 pm.
In terms of the ES’s overall tone, it was firm all day. In terms of the ES’s overall trade, only 984,600 contracts traded.
There really isn’t much to say that hasn’t already been said: The ES and NQ are on a tear.
The ES is now up 200 handles in 5 sessions. Clearly strong earnings have been trumping supply chain problems and labor shortages. A time will come when it will matter…just not now. Unless the government can pull off a miracle there will be mass shortages. There was talk that the Biden administration was considering calling in the National Guard. It would be the smartest thing they could do, but the idea seems to have cooled. The other concern is heating oil and natural gas as winter rolls in. With crude oil approaching $80.00 a barrel, things seem ripe for a major disruption.
Our Lean: On the lighter side, the stock market is on a roll. I know I have been a cautious bull but when the markets rally so much on low volume and negative breath, I believe there is reason to be concerned. That said, the ES is currently taking bad news and making good of it. When will it end? I think a small pullback could start today. The ES ran 90% of the buy stops I posted yesterday. Our lean is more slanted toward selling the rallies. That does not mean I’m bearish, I just think a 20 or 30 handle pullback is in order.
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.
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