Market Review
Tech folks fear the gig may be up and long-term investors are rotating out of Tech and into growth Brick and Mortar. How long has it been since we’ve heard that? Google is looking spotty. Anything can change in a day or two. The American Jobs Act and other billion-dollar expenditures are on the table.
I’m not really seeing that the SPY, DIA and QQQ are reflecting tick for tick the price movevent of their components. They were supposed to be proxies for the components. It’s just my eye, your’s may vary…
The CME put out a press release and the pits do not seem to be opening up. That’s the big contract, too! Like it or not, we are going into this brave new world feet first. Colorado still has the mask mandate. And kids in school across America for the most part are wearing them too?
The market yesterday had a hard push down for 40 minutes dropping from 4165 down to 4141. I gave the level of 4141 so traders who took it long had a very good day. A 16-point move up for 20 minutes to tag the 4157 then a dip to the halfway 35-minute reaction finds a resting bid at the 4146 handle.
Activity and volume enter and a 35-minute 33-point strong rally lifts offers up to 4179 as the lunch SLOG opens its door for lunch. A 175-minute dip back to halfway sets the next rally up to higher highs and beyond. As I write, Globex is trading 4197 handle.
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Looking Forward Friday, May 7, 2021
Everyone is waiting on the Jobs Numbers or is that what moved it yesterday? Janet Yellen got her comments walked back the prior day and the market is onward and upward. 4211 seems to be the next high water mark in the market’s way.
Big contracts are not trading in the pit so you may see the markets more aggressive with quick moves. In 2021 it is more about finding the signal through the noise. I saw bigger size 2K and up getting out of position and some getting in.
It’s clear blue skies. The market is not concerned about your grandchildren or your great-great-grandchildren. Only about profits. Providing the Trillion dollar proposals get approved, yes we are going up. Worry about tomorrow when tomorrow comes.
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Chart of the Day
ARK Innovation Mirrors Moves in Unprofitable Tech Stocks
Ark Investment Management’s flagship exchange-traded fund and a gauge of unprofitable U.S. technology companies are essentially “one and the same,” according to Julian Brigden, president of Macro Intelligence 2 Partners LLC. Brigden compared the ARK Innovation ETF, managed by Cathie Wood, with a Goldman Sachs index in a Twitter post Wednesday. Since 2019, the 30-day correlation between them has been at least 0.68 and has risen as high as 0.98, according to data compiled by Bloomberg. The highest possible correlation is 1, which occurs when two values are moving in lockstep.
Our View
Jobs Friday and ES 4240
The (ESM21:CME) traded back up to 4,180 during yesterday’s S&P 500 index trade. The futures rallied almost 75 points off Tuesday’s 4120.50 low up to 4194.50. We could do a big thing on all the ‘ups and downs,’ but that’s not what we are going to do today.
What we can say is late in the afternoon, the Nasdaq futures that were weak all day reversed and the ES went with it. In the end, the overall tone of the ES was firm but remaines susceptible to the whims of the (NDU21:CME) In terms of the day’s overall trade 1.3 million ES traded, down nearly 600,000 from Tuesday’s volume.
Jobs Friday
US private payroll increases by the most in seven months in April as companies boosted production amid surging demand and the U.S. economy continues to gain momentum. The services industry employment increased last month by the most in more than 2.5 years.
According to the ADP National Employment Report, companies hired 565,000 workers in March. Economists polled by Reuters had forecast private payrolls would increase by 800,000 jobs in April and the ‘acceleration’ in hiring was across the board.
The leisure and hospitality sector added 237,000 jobs, manufacturers hired 55,000 workers and payrolls in the construction sector increased by 41,000 jobs. The Dow Jones estimate for tomorrow’s April nonfarm payrolls report is 1 million, compared with March’s 916,000. While nonfarm payrolls increased by 1.6 million in the first three months of 2021, the labor market remains well below its pre-pandemic levels. In all honesty I do not know how this will pay out. Will the index markets sell off on the better jobs number? That seems to be the consensus…
I have to be honest; I have had a rough week. I do not know why I continue to break my trading rule about not trading the midday chop, but I did on Monday and Tuesday started out terribly. It’s funny, when I was with the PitBull yesterday, we talked about when we first met and what he said to me. He asked “Do you follow the winners?”
I came right back at him and said, “Of course I follow the winners.”
He barked back at me, “Well that’s good because I don’t want to work with people that follow the losers.”
Making and winning is all part of the game, if we made it every day we would not be doing it. I know some people would say they would keep trading — but not me! I almost think after you have a good run you are supposed to sit on your hands and WAIT! The other thing about being on a roll is just like the PitBull says: It’s not a profit until it’s booked.
Our lean: There are all sorts of rules that come into play today. The first is the ‘fade the jobs gap rule’. If the ES gaps higher or lower on high Globex volume you fade it, if it gaps higher up you sell it, and if it’s down you buy it. The other rule is part of NHOTC. If the ES and NQ are at or near their respective highs at 2:30, the odds of the ‘Late Friday Rip’ Barring some crazy headlines our overall lean is to buy the pullbacks but we need to get past the jobs report first. If, and I say if I am right I see nothing in the way of 4220 early and 4230-35 late. Remember, this is all about the ‘expiring options’
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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