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!
Stocks are not being pressed down upon the market but they are not lifting either. At least that’s the impression given by the CASH and Emini yesterday. This time the job number did not get the party started. Well, it got started at the open, but after the open, it was a dismal failure.
We had a hard push up for 15 minutes that checked the 4210 level. Then a 25-minute selling wave found support just under the opening print at the 4200 handle. A 25-minute rally (five minutes and a few points less than the previous rally) checked again at the 4210 handle.
That would have been the best place to get short if that is what you do. The reasons were, extent and duration of the previous move compared to the previous move, supply seen at the second test of the 4210 level, and the inability to advance past the 4210 level.
I had given the 4210 handle as a level in the market timing newsletter, The AM TURN, where you might see supply coming in and we did. Price drifted down the rest of the day until about the 3:00 marker where a weak rally closed.
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Word is POTUS is looking to drop about 4 Trillion on the US Citizens today. When the music stops playing it could run up to about 8 to 11 trillion. That’s looking like trillion = a million million (1,000,000,000,000 or 10 exp12).per trillion.
We have a weak close and what does Globex do? Slams it right up to 4217 on little to no volume! And by my eye, as I write this it is starting to drift back down. The market loves a good story. And if 8 to 11 Trillion starts to pour back into the economy, no matter where the source is. They could start lifting offers today?
News to move the market: International Trade in Goods & Personal Income and Outlays & Retail Inventories & Wholesale Inventories at 8:30, Chicago PMI at 9:45, Consumer Sentiment at 10:00 all times EST.
Levels you say? Perhaps a little interest at the 4186 or the 4179 with a 4-point stop. Remember Globex may be all over these by the time the opening print prints. It’s the second day in WB’s cycle and well, the weekend is upon us. If you are reading this and are not a subscriber, now would be a great time for you to subscribe. Click the red button below to SUBSCRIBE to the AM TURN NEWSLETTER.
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Chart of the Day
Dow Industrials Separate From S&P 500 Before Turning 125
The Dow Jones Industrial Average reached its 125th anniversary Wednesday after displaying more independence than usual from the S&P 500 Index. The correlation between the U.S. stock benchmarks over 60 trading days, or about three months, shows as much. Typically the indexes move in lockstep, as the average correlation has been 0.96 since 2000, according to data compiled by Bloomberg. Yet this month’s readings have been as low as 0.81, the lowest since November 2000.
Rebalance; 1.2 Billion Shares Trade NYSE Close
No one from Goldman Sachs or JP Morgan called, so how could we know? The Russell 2000 index of small-cap stocks. There are a lot of tricks in the big firm’s playbook at month-end and it’s not called ‘rotation,’ it’s called ‘end of the month rebalance.’ Rebalancing is the process of realigning the weightings of a portfolio of assets. It involves periodically buying or selling assets in a portfolio to maintain an original or desired level of asset allocation or risk. For example, say an original target asset allocation was 50% stocks and 50% bonds.
Covid Riddled Stock Market Won’t Go Down
It’s really true. The U.S. economy is riddled with problems, but the S&P has rallied 91.6% since the March 2020 lows. It reminds me of the credit crisis from 2007 to 2008. Clearly, as these two events have shown, the stock market takes bad news and makes good of it. That can be explained with just two letters: QE, perhaps better known as quantitative easing.
I was on the floor the day the S&P made its March 2009 low at 666 and I told all the desk customers that day that I thought the low was in. It was, but after it climbed a few hundred points higher I started to say it was topping out and it traded all the way up to 1,200 in April 2010. It got there thanks to QE and it’s exactly how the government came to the rescue this time around, albeit, much faster.
As long as trillions of dollars are being pushed into the system, the markets will continue to go higher. Toward the end of QE, the banks started doing overnight repo operations. This is where the banks or other financial institutions buy securities with the proviso that the seller repurchase the same securities the following day. Financial institutions do this in order to raise short-term capital.
According to New York Fed data, volume at the Fed’s overnight reverse repo window surged to $433 billion on Tuesday, the 3rd largest uptake ever (the biggest was $474.6 billion set on Dec. 31, 2015). Over two months ago, there was zero reverse repo activity. The repo activity has traders thinking the Fed is tapering its easy money policy. This would be a big deal, but I don’t think that’s the case. In fact, I think the Fed is a long way off from a full taper.
Our view: The last trading day of May and the first trading day of June are historically bullish. It’s also week 4 options expiration. It’s 10:45 pm and the ES traded all the way up to 4216.75 and is trading 4211 last. I still think 4235-4240 is in play today, but I’m also concerned about a big gap up open and some type of early pullback. Remain patient — it’s coming.
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