Market Review
Tuesday night’s Globex session was quiet. Just before 7:00 am on Wednesday morning, the ES traded down to 4556.50, short-covered, and opened the regular session at 4569. After the open, the ES moved sharply in both directions. The ES quickly sold off down to 4558 and then rallied 16.5 points up to 4574.50 around 10:47.
The ES pulled back to the VWAP at 4567.75, then rallied up to a new daily high at 4575.75. After the high, the ES fell into a big back-and-fill pattern from the 4570 level down to 4560.25 at 11:00. The back-and-fill pattern lasted from 11:00 to 2:00 and finally broke when the ES rallied up to 4574, did another little back-and-fill, and traded up to the high at 4576.25.
The ES sold back off down to 4555.50 at 3:21 as the MIM started showing $618 million to sell. On the 3:50 cash imbalance, the ES traded 5450.50 as the 3:50 cash imbalance showed $1.4 billion to sell and sold off down to a new low at 4543.75 at 3:58 and traded 4546 on the 4:00 cash close. After 4:00, the ES traded from 4540 to 4548.50 and settled at 4547.75, down 15.5 points or -0.34% on the day.
In the end, it was a very choppy trading session with some big rotations. The bonds were up 1.26% and the Russell was down 41 points (down almost 2%). In terms of the ES’s overall tone, when the NQ reversed the ES fell apart. In terms of the day’s overall trade, volume was on the light side at 1.215 million contracts traded.
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MOCs for the month.
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SpyGate: Bots a bit neutral on the day and not as negative as price action would suggest.
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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: 10:00
N/A
Low: 15:59 (close)
N/A
Today:
High:
10:00 – 12:00 88%
Low:
09:30 – 10:00 76%
10:00 – 12:00 24%
The east coast storm knocked us offline yesterday so there were no predictions.
Chart of the Day
Time for TLC? That’s tax-loss selling candidates to BofA
Some TLC may be just what stock investors need, according to Savita Subramanian, Bank of America Corp.’s chief U.S. equity strategist. That’s TLC as in tax-loss selling candidates, as Subramanian and two colleagues wrote in a report Monday. They looked at companies in the S&P 500 Index that fell more than 10% for the year through October and tracked their relative performance for the next three months, through January of the following year. The group beat the S&P 500 in 24 of the past 35 years and came out ahead by 1.6 percentage points on average.
Our View
Yesterday was the second day in a row that the ES and NQ sold off late in the day. I made a comment when the NQ started down-ticking that it looked like someone was taking profits in the Nasdaq. Like the PitBull said yesterday — you take FAANG out and the markets would crash.
Breadth was not robust yesterday either. It was a 79% downside day on the NYSE and a 56.4% downside day on the NASDAQ. That can be explained pretty simply, too. Microsoft and Alphabet both rallied to new all-time highs on earnings. With a combined $4.4 trillion market cap, this really can do some heavy lifting. Throw in Tesla’s gain (and its $1 trillion market cap) and you can see how just a few stocks can keep the market afloat.
I don’t think there is going to be a crash. Pullback? Sure. Will the dip buyers step in? 100% they will.
So where are we in all of this? Right now the volume is so low because “the S&P is up too high to buy but too firm to sell.” That’s really where this is right now.
They say there is no more T+3, but no one can tell me the big funds do not mark up and mark down stocks at the end of the month and quarter. I think what happened last night and several other nights recently is that the ES sold off on Globex but after the European open and into 7:00 am the futures start to rally.
I could be wrong but I think a lot of the erratic movement is all algorithmic trading programs. When the volume is this low, the ES gets overcrowded with programs and the bots just fire away up and down. You get caught on the other side of this and you quickly learn the meaning of “chop.”
Our Lean: Sell the rallies, but if by chance the futures are down hard late in the day I may take a stab at a small long. Remember, when the ES closes on its lows there’s usually a bounce, that’s when we will see what the rally is made of! Lastly, the Russell was down 41 points yesterday. Look for the opposite today.
Last Day Oct
DJIA: Up 10/21, Total Pts -140.47, Avg -0.05%
S&P: Up 11/21, Total Pts 0.44, Avg 0.02%
NASDAQ: Up 11/21, Total Pts 104.69, Avg 0.35%
R2K: Up 11/21, Total Pts 24.56, Avg 0.29%
1st Day Nov
DJIA: Up 13/21, Total Pts 946.33, Avg 0.21%
S&P: Up 13/21, Total Pts 87.89, Avg 0.17%
NASDAQ: Up 13/21, Total Pts 265.99, Avg 0.28%
R2K: Up 10/21, Total Pts 37.2, Avg 0.1%
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.
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