Tuesday’s Session was Cycle Day 1 (CD1): Price continued in rally-mode until excess momentum fulfilled Cycle Penetration objectives, then reversing direction, selling down to yesterday’s late day breakout (3943), and finally settling neutral mid-range. Range was 28 handles on 1.332M contracts exchanged.
…Transition from Cycle Day 1 to Cycle Day 2
This leads us into Cycle Day 2 (CD2): Having closed mid-range, typical price action expected would be for continued consolidation of recent rally. As such, there are two estimated scenarios to consider for today’s trading.
The early selling MiM starting at 14:00 started a market pull-back that was over in 40 minutes as the MIM started to pair and the market rose again. The MOC at 15:50 was over a billion to buy and that set a 5-point candle in place at 15:50 with the final candle of the day retracing that gain.
A decent day on Spygate with some nice signals on continuation trades. Ovearall there were 86 buy programs and 93 sell with a slight negative accumulation on the day.
Spygate is now part of the MIM trading groups’ data.
As the US enjoys a cooling period between rises, we see that Canada and some of the islands still have growing daily new cases.
It is all over the place in Europe, the UK and Portugal are falling but Norway and Spain are over 100% growth rate two weeks over two weeks. The Astra-Zenaca controversy doesn’t help, not just because they have paused, but they have scared an already reluctant population from participating.
Wear your masks! Stay at least 10 feet behind someone wearing a mask! (Particularly in a checkout line) Stay home! Take your Vitamin D!
Chart of the Day
Investors would do well to favor the biggest values among U.S. stocks, according to Keith Lerner, chief market strategist at Truist Wealth. Lerner recommended “pure value” shares, which are especially cheap relative to earnings, sales and asset values, in a report Monday. Lerner compared the industry makeup of the S&P 500 Pure Value and Russell 1000 indexes to help make his case. Energy and financial stocks, this year’s leaders among the S&P 500’s 11 main industry groups, account for 51% of the pure-value index. That’s almost twice their combined weight in the Russell 1000 Value.
The Federal Reserve and the S&P 500
The S&P futures (ESM21:CME) traded higher in the first part of the morning yesterday, pulled back, and then rallied during the first day of the Fed’s two-day meeting. The VIX fell under 20.
Global markets were muted overnight. In Asia, the Nikki and Shanghai Composite closed fractionally lower, the Hang Seng fractionally higher, and the CAC, DAX and FTSI were mixed. At 6:30 am the ES is down 0.25, the Dow futures are up 30, and the Nasdaq futures are down 60.
Federal Reserve officials are scheduled to release their latest economic projections at 2 p.m. ET. Federal Reserve Chairman Powell is likely to say he expects the labor market and inflation to rebound faster than they anticipated in December and is expected to reaffirm the Feds commitment to keep interest rates low and continue bond purchases until the job market shows further progress. According to J.P. Morgan Asset Management’s Hugh Gimber, ‘markets across the board are expensive today and are pinned on Central Bank support and are very sensitive to changes in Central Bank policy.’
Our view, I had a typo in yesterday’s view, I said the ESH would trade 3770 and meant to say 3970 and the high was 3970.25. That said, as bullish as I may be, historically the S&P has not fared well on the second day of the fed’s two-day meeting. Our lean is to sell the early rallies today using tight buy stops. I know the NQ has rallied the last two days but that’s because of the rotation out of the Dow and Russell and into the Nasdaq. I think we could see the opposite today.
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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