Market Review

PTG 3 Day Cycle (a.k.a. Taylor Trading Technique)

Author: David D Dube (a.k.a. PTGDavid)
Polaris Trading Group

Tuesday’s Session was Cycle Day 2 (CD2): Price consolidated as expected with an upward lean fulfilling 3 Day Cycle objectives. Late day test of the 4360 handle was successful, which converts to a key reference level. Range was 27.25 handles on 1.223M contracts exchanged.

 …Transition from Cycle Day 2 to Cycle Day 3

This leads us into Cycle Day 3 (CD3): 3-Day Cycle Objectives have been fulfilled, so we’ll mark today as a “wild-card” for direction. The Key-reference level is marked at 4360 and is today’s Line-in-Sand (LIS) as heavy trade activity unfolded at this price point late in the prior session. A potential test of the Cycle Day 1 Low (4341.75) may also be in the works. Estimated scenarios to consider for today’s trading.

1.) Price sustains a bid above 4360, initially targets 4375 – 4380 zone. 

2.) Price sustains an offer below 4360, initially targets 4345 – 4340 zone.

*****3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.

For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:

Link to access full Cycle Spreadsheet  > > Cycle Day 3 (CD3)

Thanks for reading,


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Chart of the Day

S&P 500 tech stocks approach dot-com era valuation peak:

Chart by David Wilson – Bloomberg Radio

U.S. technology stocks may soon be more costly than they ever were in the dot-com era. The S&P 500 Information Technology Index closed Monday at 7.43 times projected sales, according to data compiled by Bloomberg. That’s less than 0.3% from a record in March 2000. The industry is challenging the high 3 1/2 years after the S&P 500’s forward price-sales ratio first topped its own March 2000 peak. Technology-stock valuations are at odds with “unprecedented headwinds” such as fiercer competition, higher taxes and stricter regulations, Morgan Stanley Wealth Management wrote in a report Monday.

Our View

It Was All Good Until The TLT Came Along – Now What?

What happened in the futures market yesterday? The S&P 500 futures (ESU21:CME) sold off down to 4367.00 on Globex at 9:03 am, rallied back up to the 4358.00 area, opened at 4367.50 on the 9:30 ET futures open, and immediately went ‘bid’ as buyers jammed it higher. At 10:36 the ES made a high at 4380.25, up 13.25 points, and pulled back down to 4373.60 a few minutes later at 10:46. 

The ES pushed to new highs two more times after that — once at 11:28 to 4383.25 and again at 12:01 to 4383.75. Then we ran into some trouble. 

The ES and NQ started to slip as the US Treasury bonds ETF (TLT) tumbled. The first push was a 17-handle selloff down to 4367.25 at 1:20. After a few failed rally attempts up to the 4371 area, the ES made a sequence of lower lows. At 4:03, a few minutes after the 4:00 cash close and with the MIM showing over $1.4 billion to sell, the ES traded 4358.50, 25.25 points off the high of the day. On the 5:00 futures close the ES settled at 4361.00, down 15.25 points or -0.35% on the day. 

In the end, the TLT basically sold off from its session high at $147.53 just after 10:00 and ultimately settled just above the low of the day at $145.22, down 0.77% on the day and down 8% YTD. 

What’s the connection? Yields — or as some would say rates. 

As yields rose, stock sold off. 

In terms of the ES’s overall tone, it seemed to overlook the 5.4% jump in consumer prices, but it could not ignore the bond weakness. In terms of the day’s overall trade, volume was decent but not high for a day like this, as 252,000 ES contracts traded on Globex and 965,000 traded on the day session for a total of 1.22 million contracts traded. It was not an easy day. 

Our View

WIth a new ES high and the VIX down to $15.94, everything looked great until the TLT fell apart. It was all buy programs in the morning and all sell programs in the afternoon. Like I said above, it was not an easy trade. That said, you have all heard me say that I was expecting some down days this week and that ES 4400 would not come as easy as ES 4300. In that respect, so far so good. 

The Ned Davis stats show the first 4 trading days of the week as being up and Friday being weaker. I will be the first to admit that one good day could push the ES to 4400, but I don’t think the ES goes straight up without some further pullbacks. 

Our Lean: keep an eye on the TLT, sell the early rallies and buy the drops. The ES has been making weekly lows on Wednesdays and Thursdays so keep an eye on that. I know the stats show the July expiration day as weak, but if we go down another day it could set up a good buying opportunity. 

And, oh yeah…don’t hold losers, use stops. Let’s finish the week strong and smart.

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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