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 Emin futures using the Lens of Wyckoff Principles and the Eyes of WB’s clock. The clock that controls all turns intraday, every day!
The premarket numbers had price all in a tizzy, probing for new lows and reaching for all-time highs. Is it distribution? Price is becoming violent in its moves. For now, the lows are holding. The news is candy coating, the price behavior. I track all S&P 500 securities and I saw a ton of red and trading below the previous day’s lows.
Weekly and Daily: Weekly gave it a go testing the highs and held on lower volume (this has not changed). Daily opened with an opening bulge and started to round over.
Technical Position: Slight upthrust from the previous day’s high, a pullback to halfway, and price is unable to hold and rally. Air pockets down past half-way previous day range and finds support at Settle. Following rally is checked at 1:00 pm and is unable to test the current high of day. Price closes slightly above the middle. This indicates weakness. Composite Man is unwilling or unable to rally to test current highs.
GLOBEX: As I write has held the highs of the 1:00 rally. Could see a test later in the night of the trading range.
If we can shut the door to the aberrant day, this is what may unfold:
Bullish Anticipation: I saw some heavy buying on the way down to the tune of 3300 at 33, 1127 at 29, and 1072 at 28, and then some down at the 23 level. If price drifts down to these levels, expect some buying if the professionals desire to defend their position.
Bearish Anticipation: As price was checking the 4244 handle, I saw 8142 come in and check its range. If price gets back up to this level, expect some test of selling at this level. And about 2800 more at the high of day 4247 handle. See if price can take it out on increasing volume as price expands into higher highs.
Trade Plan: We got the numbers and news massaged the results. If price is testing high, we need to see increasing volume taking out the offers. By my eye, this smacks of potential distribution. The last catalyst is another Fed meeting. I doubt there will be any POTUS effect at the G7 meeting.
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For now, the bid seems to be holding. Each dip down is lower as volume comes in at the bottom only to rally price back up to the highs.
The last dip at 11:00 held at the 4218 handle. This is near the close from the previous day. I saw a lot of volume coming in at that level. And the dip before yesterday morning’s open sprang that level. Could price go up higher? Yes. Could it dip down? Of course. No real lean until the highs from yesterday are tested.
Levels you say? Perhaps a little interest at the 4218 if the best level for the professionals to defend. Remember Globex may be all over these by the time the opening print prints. It’s the last 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
Black gold beats yellow gold for Raymond James strategist
Black gold or yellow gold? The question arose from a report Wednesday by Tavis McCourt, an institutional equity strategist at Raymond James Financial Inc., comparing the prices of oil and the precious metal since 1983. The ratio between them plummeted 94% through April 2020 from a July 2008 peak, according to weekly data compiled by Bloomberg. Since then, the gauge has only recouped about 25% of its loss. “Oil is still very cheap,” McCourt wrote. Energy stocks also stand to benefit, he added, as producers increasingly focus on returns rather than growth.
S&P 500 New All-Time Highs
The S&P finally broke out of its narrow trading range yesterday after a mixed bag of inflation data jumped to a 13-year high. The leap in consumer prices combined with an improving labor market and an economy that’s emerging from the Covid-19 pandemic. I mean seriously, have you been to an airport lately? People are swarming about.
The ES sold off quickly after the CPI release, trading down to the 4197 level. But the numbers weren’t out of line enough to hold the market down and a few minutes later it was trading 4215.
In the MrTopStep chat, I said before the 9:30 open that, “if my buys were right, the trade could be worth 39 to 45 points.” Not long after the open, the ES started taking out the buy stops that have been building up for the last three plus weeks. That’s how it works. Traders park their stops at or near key levels and when they’re caught offside, it can drive a huge stop-run (in both directions).
The opening buy program catapulted the September futures all the way up to 4249. After the early rally, the futures reversed more than 30 points down to 4218. It’s one of those days where again, we pop and flop lower. The ES rallied back up to 4245 for the afternoon and settled at 4238 on the close, up 19.50 points or 0.46% on the day.
In terms of the ES’s overall tone, it was very firm early, reversed lower, and then recovered. In terms of the day’s overall trade, volume was steady at 1.53 million contracts traded, ahead of the 20-day average of 1.34 million.
Our view: Today is the weekly options expiration. Yesterday was not a good day for the traders in the MTS chat – it was a great day.
Now the question is, can the ES rally again today? My answer: it can and it will.
The real question is, as always, will it hold? My guess is we again see two-way price action. Sell the rips and buy the dips. There is a good chance that ESU (the September contract we just rolled to) has 4245~4250 is on TAP!
Let’s get past the first part of the day and worry about the close later.
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