Market Review
Disclaimer: For educational use only. I’m not dispensing financial advice. We are having an intellectual conversation (you and I) on the topic of trading the Emini futures using the Lens of Wyckoff Principles and the Eyes of WB’s clock. The clock that controls all turns intraday, every day.
The jobs number from yesterday gave a push to get price back above Wednesday’s highs before the open. After the opening, price lifted 8 points. It was on a mission. And what was that mission? To take out a 30-point resting shelve of supply from 4135 up to 4165.
To get a better understanding of how yesterday’s trade played out let’s look at the Vesica Piscis of the move that started:
On Wednesday, May 19, 2021, ESM21 opened at 4073. The previous open was 4161. Settle was 4122. The day started with a selling wave lasting 45 minutes in duration ending at 4055 at the 10:15 marker. A strong 20-minute buying wave gained over half of the reaction and gave the indication the low of the day may be in.
A quick 5-minute return found support at the 4055 level confirmed that notion. A-20 minute up move and a 5-minute reaction found support at the 4067 level. If an active trader was looking to get long, this would have been a great place. Price was trading above the opening print and the last two reactions were only 5 minutes and the rallies were 20 minutes in duration. This indicates buying support. Willingness to lift the offer. Bullish price behavior.
An ideal price profit projection would have been at the 4105 level the first-hour trading range flipped from the open to the upside. I had given 4060 and 4056 as an intraday day level where price have may find support. It was a good day.
Around 2:05 just after the FED YELL, price started to dip down on 1 by 1 and 2 by 2’s. Price found support at the 4080 level which was half the day’s trading range. A move back up and then a retest at the 3:05 marker indicated the last hour may print the high of day. If not, at the last print. And price behavior did not disappoint.
The projected target of 4105 came in at the 2:20 and 2:30 handle. And the high of day was just past the 4110 handle.
If you were following WB’s clock, the clock that controls all turns every day, intraday you would have read in the PROS and NUMBAHS in the AM TURN on page 3: Shape of the day: If buying pressure: The first day starts the cycle S1H day. You expect it to be bullish with constant buying pressure. The AM is the high, but the day is loopy loop with odds and probabilities for the last hour high.
Looking Forward Friday, May 21, 2021
Globex has yet to take out the RTE 3:30 high but it has held the RTE 12:50 low from the previous days trade. Volume was 1.2 MM compared to 1.9 MM the turn around day. Providing price goes up on consistent volume the bull trend may extend.
Not much news to move the market: PMI Composite Flash at 9:45, Existing Home Sales at 10:00. Earnings season is about 93 percent over.
As I said in last Friday’s Opening Print: Happy days are here again. Ding dong the wearing of the mask could/will soon be over. That is unless they find some other reason to keep us down… That’s where you get those roaring decades! And what did they do later that afternoon? (about six hours later the CDC changed their mask guidance to no masks)
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The annual inflation rate in the US soared to 4.2% in April of 2021 from 2.6% in March and well above market forecasts of 3.6%. It is the highest reading since September of 2008, amid a surge in demand as the economy reopens, soaring commodity prices, supply constraints. There is also a base effect weighing as the coronavirus pandemic dented economic activity bringing the inflation rate to 0.3% in April 2020. The biggest increases were recorded for gasoline (49.6% vs 22.5% in March), fuel oil (37.3% vs 20.2%) and used cars and trucks (21% vs 9.4%). Inflation also accelerated for shelter (2.1% vs 1.7%) and new vehicles (2% vs 1.5%) and rebounded for apparel (1.9% vs -2.5%), but slowed for medical care services (2.2% vs 2.7%) and food (2.4% vs 3.5%). Meanwhile, compared to March, prices rose 0.8%, the most since 2009 while monthly core consumer inflation increased 0.9%, the most since 1996. source: U.S. Bureau of Labor Statistics
Chart of the Day
GMTT / Chart of the day – EURO STOXX50 (JUN) – MAY 21, 2021
The EURO STOXX 50 Index, Europe’s leading blue-chip index for the Eurozone, provides a blue-chip representation of supersector leaders in the region. The Index covers 50 stocks from 8 Eurozone countries: Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, and Spain. Our forecast for Europe is bearish and while we have not seen much downside yet, we focus on being short and not long.
The overall outlook is that the equity markets are overstretched and overdue a significant pullback. As with topping markets, this comes in stages, with relatively small pullbacks followed by a bounce before the nosedive. Sell the rallies remains to be our focus and below 3986 the Stoxx50 Index (JUN) elects a short signal with the following projected downside targets: 3973, 3938, 3926, and below that we get the confirmation towards our target of 3826. The suggested buy stop is 4016. Note that we can still see another bounce, but the sentiment is bearish and the highest target on the EuroStoxx50 that we get now is 4053. If we do move higher first, then you utilize the next bouncing levels as your elected level to short with a buy stop of around 0.5%.
Have a great day and a nice weekend!
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Our View
S&P 500 Futures Recap – Trade Date May 20, 2021
S&P And The Great Thursday RIP
The ES traded 4120.75 on yesterday’s open and didn’t waste any time before trading up to 4164.50 early in the day and all the way up to 4169.25, the high of the day at 15:25 before settling at 4153.50 on the 4:15 futures close. In terms of the ES (+1.1%) and NQs (+1.8%) overall tone, tech stocks led the rally, breaking a three-day losing streak. In terms of the day’s overall trade, volume was lower at 1.4 million.
Clearly, there is a correlation between the early week and late week bounce going into the Friday option expirations. We believe we have done our very best to enlighten trades to the pattern we have been talking about for the last several months. It’s proven to be a very profitable trade if it’s caught right and if you are willing to hold for a few days.
I am going to keep this brief. We have stuck to our trading plan and if all goes right today, the ES could be setting its sights on 4240. Remember, it takes days and weeks to knock the markets down and only one to bring them back up.
Our view: Part of the reason we do not see as many NHOTCs is that everyone and his mother get too long late in the day. I’m not saying there won’t be a late rip today but if you have big profits going after 4:00, there is nothing wrong with taking some profits early. The Ned Davis S&P cash study for today is weaker than yesterday, up 19/down 18 of the last 37 occasions but the Monday after the May expiration is bullish up, 21/down 16 of the last 37. Our lean, look to buy an early pullback. If the ES can get above 4174 and hold I think there could be a stop run up to 4186 and above that, I have 4204 and then 4240 but not today.
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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