Market Review
Remember when you were little and you got all dressed up in your Halloween costume and your mom would say, “the goblins will get ya if you don’t watch out?” Well, that’s kind of what the markets are still saying. After a 6.3% drop and a 3.8% rally, the ES has not been holding the rallies.
The ES closed weak on Friday and lost no time adding to the losses Sunday night on Globex as the futures traded all the way down to 4352.25. But like many occasions when the ES is weak, it short-covered and opened Monday’s regular session at 4376. After the open, the ES traded down to 4373.50 at 9:33 and then traded up to the high of the day at 4407.50 at 10:21. The ES pulled back down to the 4396 level, rallied up to a lower high at 4405.75 at 11:42, and at 1:49 dropped over 40 points down to 4363.50.
The ES bounced around after that but eventually sold off down to a new low at 4358.25 at 3:47 as the MIM flipped from $120 million to sell to $88 million to buy. The ES traded 4357.00 as the 3:50 cash imbalance showed $563 million to sell and then down-ticked to 4351 at 3:59 and traded 4350.50 on the 4:00 cash close. After 4:00, the ES sold off down to 4344 and settled at 4348.50 on the 5:00 futures close, down 33.25 points or -0.79% on the day.
In the end, the overwhelming weakness in the ES dragged the NQ down with it. In terms of the ES’s overall tone, every rally failed. In terms of the day’s overall trade, there were less than 1 million contracts traded at 3:00 and the total ended up at just 1.2 million.
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Baxter
Baxter is our new AI trading helper. This data is early, new, and not very well tested but we want to share some of our findings. We are concentrating on the SP500 which should benefit ES futures and SPY traders.
Last Trading Day:
High: ~10:25
09:30 – 10:00 61% (wrong)
12:00 – 15:30 17% (wrong)
15:30 – 16:00 18% (wrong)
Low: ~16:00
10:00 – 12:00 >90% (wrong)
Today:
High:
10:00 – 12:00 >90%
Low:
10:00 – 12:00 >90%
Baxter was dead wrong yesterday missing on all four possibilities. Today he has both the high and low in the post-opening 30-minute am session.
Chart of the Day
Our View
The S&P did what I said it would do yesterday; it rallied after the open and as I expected, failed miserably. Oil — which is not supposed to be a problem for stocks — finished above $80 a barrel yesterday for the first time in nearly seven years. I have a hard time thinking that’s not a problem. Why? Because low-income families can’t afford it. Oil is just one bad thing on a list of many.
Our lean, I am sticking to my call from over 10 days ago, that the ES will bottom on or just after the October options expiration. If you are following the price action, that’s selling the rallies. If you’re bottom fishing, look for a pop on the open — then it’s the same question as yesterday, will the rallies hold? I don’t think so. You can take it from there.
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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