The ES traded down to 4375.265 on Globex, short-covered early, and traded 4398.25 on the 9:30 am ET futures open. Quickly, it shot up to 4407.25 at 9:36. After the early high, the ES ‘stutter stepped’ down to the VWAP at 4397.00
At 10:46, the ES gave us a bit of back-and-fill and rallied up to the 4409.25 level, pulled back down to the 4406.50 area, and then a small buy program pushed the futures up to a new daily high of 4413.25. From there, the ES traded in 4 to 5 point range until 3:30 when the ES made a new high at 4413.50 high as the MIM started to show $300 million to buy and flipped to $175 million to sell.
As a rule of thumb, it’s never good when the ES makes a new high by 1 tick.
The ES then pulled back to 4408.75 and traded 4411.50 on the 3:50 cash imbalance as the final MIM showed $263 million to sell and traded up to another new high at 4415.00.
In the end, it was a slow grinder to the upside. In terms of the ES’s overall tone, it was firm but I also think “thin to win” played its part on Monday. In terms of the ES’s overall trade, volume was steady but below average at just 906,400.
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No Baxter today. New model next week.
Chart of the Day
GMTT Chart of the Day – Hang Seng Index – S&P (SEP)
Hang Seng Index (China) is down over 10% since its high last week!! We are short from 28744, and our next downside target – given in our GMTT Research Report yesterday – was reached this morning. The low was 24754 which is more than a 10% correction since we called the high last week.
The S&P is still holding up and making new all-time highs, but here to we expect to see a 10% correction. The range for today is 4362 – 4412. We hold no position now but want to go short again below 4402 with a tight buy stop at 4410. If the S&P trades above 4412, then that will become the next level where we want to take a short. At the current levels we are not looking to be long this overinflated and extended rally.
We showed the example of the Hang Seng how fast a 10% correction can occur.
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In our GMTT Research Report that is published three weekly we cover the following: Global Indices, VIX, a selection of stocks, Treasury Bond, Commodities, Soft Commodities, Bitcoin and Currencies.
Today there is a slew of big-name reporting earnings: Apple, Microsoft, AMD, and Google report earnings and it’s the first day of the Fed’s two-day meeting. According to FactSet, about 54% of S&P 500 stocks are trading above their 50-day moving average, down from more than 90% in April. It’s like we were saying last week: many individual names look like they’ve been correcting for weeks or months, not days.
Sectors including regional banks and financials, energy, overseas markets, and emerging markets are all struggling. I didn’t follow my own advice yesterday, instead of buying the early pullbacks I kept trying to sell them. I kept the losses small but I was doing the one thing I keep telling people not to do, fight the trend.
Our lean, I still think you have to be careful, but that doesn’t mean the markets won’t rally again today. Our lean is to sell the early rallies and buy the pullbacks. My gut still says we should expect some type of selloff this week — it’s just a matter of when.
As for some technicals, let’s take a quick look at the NQ. This trade worked well yesterday, with a push over the Globex high at 15,126.25. That sent the NQ up to a high of 15,134 and we were able to go short at 15,129 — a five-point risk that gave us 40 handles of downside.
I’m watching a similar setup today, on the 30-minute and 1-hour charts. Look for a push above yesterday’s high — 15,134 — and a move back below it. That could get us a short for a day trade and perhaps it will turn into something more. As Danny said, we don’t want to fight the trend, but we are a bit extended up here.
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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