Tuesday’s Session was Cycle Day 1 (CD1): Normal CD1 unfolded as price continued its decline reaching Statistical CD1 Violation Extreme during GLOBEX Session. Price again pushed aggressively lower during the Opening Range, finding a secure low at 3804.75. The remainder of the session, price swung between Value Area High and Low of 40 handles. Late day rally drove shorts to cover closing the opening gap. Range was 91.25 handles on heavy 2.225M contracts exchanged.
…Transition from Cycle Day 1 to Cycle Day 2
This leads us into Cycle Day 2 (CD2): Cycle Rally Objective (3868) has been fulfilled during the prior session. Expectation for today’s session is for continued elevated volatility as price searches for balance acceptance. As such, there are two estimated scenarios to consider for today’s trading.
Wow! What a day, what moves. Buy the dip still is the slogan, we should start seeing some bigger dips. The MiM was a non-player yesterday with a balanced MOC. The 2 o’clock run into 15:30 was an impressive 40 points, there was a 10 point shakeout along the way. You need deep pockets to trade this market. If you have those pockets, these are the kind of days that can make them deeper.
LAST CHANCE TO JOIN THE MIM AT 2020 PRICES. We need to raise our subscriptions prices for 2021 to cover the increased data fees. Why do internet and computers get cheaper and cheaper but data more expensive? To be grandfathered in for 2021 you need to purchase now.
As a whole, the US continues to improve in dropping daily cases.
Looking around Europe, most countries are in a pullback, Sweden and even Germany are starting to see a swing back and each is working hard to prevent that. Both countries have a lethargic start in vaccination so behavior control will be paramount to prevent another wave.
Czechia is struggling and Israel is handing over excess vaccines to their aid in favor of some diplomatic ties evidently.
Wear your masks! Stay at least 10 feet behind someone wearing a mask! (Particularly in a checkout line) Stay home! Take your Vitamin D!
Chart of the Day
“Pullbacks in the S&P 500 should be bought in anticipation of higher highs,” Ari Wald, Oppenheimer & Co.’s chief technical analyst, wrote in a report Saturday. He cited the relationship between the stock index and an indicator of “credit stress,” the yield gap between the Bloomberg Barclays U.S. Corporate High-Yield Index and 10-year Treasury notes, as compiled by Bloomberg. Last year, the gap started widening about a month before the S&P 500 peaked. There is “little evidence that credit stress is emerging in a similar manner” this year, Wald wrote. Instead, the bond and stock gauges have moved together.
(ESH20:CME) GLOBEX Session
(ESH20:CME) Day Session
Opening Print: 3849.25
Total Volume 2.23 M
S&P 500 Futures Recap – Trade Date February 23, 2021
Turnaround Tuesday Buyers Steal the Show
After trading in a 46.00-handle overnight range, the S&P 500 futures opened Tuesday’s cash session at 3849.25 and fell sharply and quickly as heavy sells pushed the index futures to an early low of day of 3804.75 in the first twenty minutes of the session. The low print attracted buyers that would come in and give a steady lift to equities, rebounding to a morning high of 3864.25 at 10:15 CT. From there, the S&Ps would see a higher low of 3827.75 as the clock rolled into noon. Midday buyers came in strong, maintaining a steady bid into the final hour when a huge burst of volume pushed the ES up to the daily high of 3892.25, an 87.50-handle bounce from the morning low. From there, the ESH would go on to settle at 3875.25, the same exact close as Monday on impressive volume of 2.2 million contracts traded. In terms of price action, it was all about shorting the open and reversing at the 8:45 low, adding on pullbacks all the way into the 2:30 spike high. The tech sector was hit hard once again on Tuesday, however, the NQ pared losses significantly. Briefly, the Nasdaq went negative for the year. That 12883.00 price on the NQ from 2020’s settlement is key going forward.
S&P Futures Down 6In A Row Despite ‘Smashing Rally’
The S&P and Nasdaq futures opened sharply lower and dropped after yesterday’s open as bonds were falling. The expectations were that the markets would fall while Fed Chairman Powell spoke and they did but after the early fall, the markets started going ‘bid’, running buy stops and running buy programs. It was an amazing rally that saw the S&P futures rally 90 handles from its low and an over 500-point rally in the Nasdaq futures. This morning, the futures are up slightly ahead of a second day of testimony to the Senate Banking Committee. Mr. Powell is set to speak at 10 a.m. ET. Yesterday, the Federal Reserve chairman soothed unsettled markets, the question is, can he do it again today? After a strong start to the year, investors have gotten ‘spooked’ by the recent rise in bond yields which has caused concerns about rising inflation. This has accelerated the rotation out of tech stocks that led the markets higher during the COVID-19 pandemic into stocks that benefit from the end of the lockdown. Brian O’Reilly, head of market strategy at Mediolanum Investment Funds said ‘This really is a function of economies reopening, bond yields are rising because of good vaccination rates in the U.S. and U.K. and it’s prompting a simple rotation away from everything that did well last year, the stay-at-home stocks, to the ones that didn’t, the go-outside stocks’ He went on to say ‘It’s a good story in some ways, in that the market is trying to price in that economies are going to reopen.’
The yield on the 10-year note, which moves inversely to its price, has risen to its highest level in a year this week. Today it rose to 1.367% from 1.363% Tuesday. After Powell reaffirmed his commitment to keeping easy-monetary policies unchanged for the foreseeable future, the markets rallied sharply.
Our view, while I think I have had a decent feel for the ES’s price action I have been unable to turn it into profits. I make one day and I lose the next. Yesterday, I bought the open and the first dip but the futures got hit by a large sell program that threw me off base. From there I made several winning trades but when the ES dipped I got out with small profits then started trying to sell it. That said, I think the decline is over or close to being over and I expect the S&P will march to new all-time highs. Our lean is to sell the early rallies and buy the pullbacks.
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.