US markets endured two major changes in trader expectations over the last week; the US presidential election and the Pfizer/BioNTech COVID-19 vaccine. The media called Joe Biden as the next US president, but Republicans held the Senate which the markets interpret as a legislative balance which should slow the rate of US business environment changes. The US stock market interpreted both changes as bullish, sending the ESZ20 into new all-time highs. Structural support and resistance became bumps in the road as the markets searched for new fair value to reflect the trader expectations changes.
Last week I wrote,” It’s doubtful the ESZ20 will see new all-time highs until after a fifth coronavirus relief package.” Surprise! The ESZ20 blasted through its former all-time high Monday morning. I lost sight of a potential coronavirus vaccine announcement.
The Pfizer/BioNTech COVID-19 vaccine market pop may be short lived as manufacturing, distribution, and storage now becomes a major logistical challenge. The vaccine needs to be kept at or below minus 70 degrees Celsius and few medical facilities globally have freezers that cold. Distribution to pharmacies are out of the question for now. We will need a war-time effort in freezer manufacturing to support the handling of this vaccine which will take many, many months to ramp up.
This week’s ESZ20 price movement of over 350 points cleared the board for structural resistance and created potential new areas of structural support:
Resistance Areas (above):
Support Areas (below):
Volatility is reaching high levels and should come down some this week as market focus shifts to President Trump’s alleged voter fraud evidence and legal attempts to change the election results in swing states that he lost. A coronavirus relief package is still a possibility as Congress gets back to work post elections. I suspect the ESZ20 will work between the 3400s and possibly new highs in the 3700s this week.
Below is a snap of the ESZ20 daily chart with the above support and resistance numbers marked for reference. Thanks again for reading. For more information on how DTG can help your trading, visit us at DiscoveryTradingGroup.com
In the Tradechat Room
The market was destined to shed the news pop pre-open and the MOC obliged. The reveal was 700M to sell and the ES shed about 15 points in 5 minutes.
Questions? Please email me: Marlin@mrtopstep.com
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The USA now hitting at 117K new cases a day with 1000+ daily deaths based on the 7-day moving average. That is a slightly lower mortality rate than wave 2 but not by much so we would expect next week to be higher in daily deaths than that peak of wave 2 at the beginning of August.
Wear your masks!
Take your Vitamin D!
Chart of the Day
GMTT / Chart of the day / Gold – Nov 10, 2020
Yesterday’s volatile markets looked like a violent technical washout.
The Indices reached very close to GMTT second given upside target before they corrected again.
Gold and Silver pulled back significantly, and we believe that the low is in.
Last week we already mentioned that Gold could pullback one more time.
Now that this is behind us, we like to go long Gold and Silver at the market with the following sell stops:
Gold (DEC) 1839 and Silver (DEC) 23.30.
Ona another note, Crude reached our target of 40.45 and we are still long from 33.80.
Next upside target 43.80.
Raise the sell stop to 39.10.
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|(ESH20:CME) GLOBEX Session||(ESH20:CME) Day Session|
|High 3668.00||Opening Print: 3640.50|
|Low: 3515.75||High 3640.50|
|Volume: 700,000||Low: 3541.25|
|ES Settlement 3551.25|
|Total Volume 2.5M|
S&P 500 Futures RECAP – Trade Date 11/9/2020
S&P 500 Futures: COVID Vaccine Spike Meets Regular Session Sellers
After trading in a 154.25-handle overnight range higher, the S&P 500 futures opened Monday’s regular session at 3640.50, up 134.50 handles, traded a 3645.25 daily high on the open, and sold off in the early morning down to 3588.00 just after 10:00 CT and then rallied the rest of the morning up to a noon high of 3622.75.
From there, the ES began to sell off again through the afternoon accelerating late in the final hour, pushing down to the low of day at 3541.25, a 104.25 move from the early high before settling at 3551.25, up 50.50 handles or +1.44% on volume of 2.5 million.
In terms of price action, those that held long through Friday’s close or bought Sunday’s Globex open were paid. Otherwise, the trade was for the sellers on the open who held into the close.
Sell The News
After a record-breaking Globex rally and open to the regular session the ES was led lower by the NQ futures as investors sold ‘the home’ stocks. The ES fell 128 handles from its Globex high and just over 103 handles from its day session high. The NQ had two 400-point drops and its overall price action was the weakest I have seen in months. The Dow Jones was up 1,700 points in the early goings and sold off 900 points. If you’re asking why the futures reversed it’s a simple answer, the ES traded 3225 just eight sessions ago. When the positive news about the vaccine hit the tape the already overbought markets rallied sharply and then began to reverse. All the oversized Globex volume and people piling into longs at high prices got flushed out as the rotation favored tech selling. It was one of the largest upside stop runs I have ever seen and all the buying was used up early.
Our view, there are two sides to today’s trade. The first part is a question… Do you think the tech selling is over? I don’t think so but after such a big rally and drop it would not be out of the ordinary that the ES rallies in the first part of the day. The PitBull has a rule that the S&P tends to rally early in the day and early in the week. The markets have gone a long way and if I’m reading it correctly we should see a low later in the week.
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.