Market Review
Topic: Taylor 3 Day Cycle
Author: David D Dube (a.k.a. PTGDavid)
Website: Polaris Trading Group
Tuesday’s Session was Cycle Day 2 (CD2): ES rallied following a successful securing test of CD1 Low (4267.50), exceeding this cycle’s upside objectives. Range was 91 handles on 1.598M contracts exchanged.
…Transition from Cycle Day 2 to Cycle Day 3
This leads us into Cycle Day 3 (CD3): Cycle objectives/statistics have been fulfilled, so we’ll mark today as a “wild-card” for direction. As such, estimated scenarios to consider for today’s trading.
1.) Price sustains a bid above 4300, initially targets 4320 – 4335 zone.
2.) Price sustains an offer below 4300, initially targets 4285 – 4280 zone.
*****The 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,
PTGDavid
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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: ~14:45
15:30 – 16:00 84% (wrong)
Low: ~09:35
10:00 – 12:00 >90% (wrong)
Today:
High:
10:00 – 12:00 84%
Low:
09:30 – 10:00 >90%
Chart of the Day
Three charts to explain the chain supply issues.
1) Lack of Truck Transportation
US Truck capacity is 100%. Mostly the result of a labor shortage.
2) Cost of shipping continues to Inflate
Shipping container prices continue to inflate.
3) Congestion at Major Ports
Year over year comparison shows the inability to process and unload the container and tankers. Demand is too high an capacity and labor is too short.
Our View
The ES traded down to 4269 on Globex, rallied up to 4314.50 at 8:00 am, and opened Tuesday’s regular trading session at 4307.25. The ES rallied up to 4315.25 at 9:33, dropped down to 4298.50 at 9:39, and at 11:07, it surged up to 4356.25, up 87.25 points off the Globex low and up 60.25 points on the day. Finally, a day where they didn’t sell the open.
The ES then pulled back down to 4342.75 at 11:54 and then rallied back up to a double top at 4356.75 at 12:11. The ES had two pullbacks down to 4343 at 12:00 and then slowly stepped up to a new high at 4359.75 (my call was 4360).
While breadth was strong (at +80% upside volume for both the NYSE and NASDAQ), that breadth faded considerably from the morning highs, which was called out in the Mr. Top Step chat room.
From there, the ES started to sell off as the MiM showed over $500 million to buy. The ES traded 4346.25 as the 3:50 imbalance showed $860 million to sell and traded 4337.50 on the 4:00 cash close. After 4:00, the ES traded down to 4331 and settled at 4336 on the 5:00 futures close, up 42 points or +0.98% on the day.
While it was still an up day, the late day hard fade was a tough blow to the bull case. Further, the fade-in breadth earlier in the session left the indices more susceptible to the late-day dip.
In the end, all I can say is 80 to 100-point daily swings have become commonplace. In terms of the ES’s overall tone, it was firm all day until 3:20 when the momentum shifted. In terms of the ES’s overall trade, volume was good for an up day at 1.6 million contracts traded.
Our View
I think today is going to be a critical day and can go either way. I know a lot of folks think the ES is going straight back to 4450, but I think there will continue to be big dips & rips. From what I remember, the ES tends to make a low around the 2nd Wednesday in October. If I am right, that low will start the march to new highs.
I want to tell a quick story.
A guy hit the front of my car yesterday. I drive a Mercedes E300 so I went to the Nations Mercedes Benz dealership in Delray to have them estimate the damage. Six months after the pandemic, the lot was full of every type of Mercedes made. Yesterday when I went to see my sales I guy I walked the lot and there were only 15 Mercedes in a lot that held over 200. I never used to see any other makes of cars for sale there, but yesterday they had a BMW X5 truck and a 1983 Corvette in the showroom. They had some new cars but a very limited selection. When the sales guy’s cell phone rang I told him to pick it up and he said, “No, it’s this lady that keeps calling me for a 9 passenger Mercedes truck. I have told her 10 times that it’s going to take 18 months to get it.”
He went on to say that he has clients that are worth $200 million to $500 million and they tell him they will pay $50,000 over sticker and he said, “It doesn’t matter how much money you have, we can’t get the cars.”
I think there is something very bad lurking within the supply chain problems and as oil goes up and shortages occur, it could make for a disastrous winter. China is buying as much oil as it can. I have always said the Chinese knew what would happen when Covid-19 hit the US and Europe and I am sure they know that energy shortages are going to affect the entire world. I know I wrote about this a few weeks ago and the PitBull keeps repeating what Burt Dohman said about ‘martial law’ in the US next year as food and oil shortages occur. We live in an ever-changing world and I think that’s going to be put to the test.
Our Lean: Everything was fun and games during yesterday’s 90-handle rally, but when it sold off late in the day it painted a different picture. I am not saying the ES won’t rally again, but I can’t rule out a big drop either — tis the season as they say. Sell the early rallies and buy the drops with tight sell stops. I don’t think we are going back to 30- and 40-handle ranges anytime soon.
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.
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