Market Review
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!
IMPRO: Wyckoff Trader :(9:50:00 AM): potential seal for the spill; window still open. If you took the first level 4542 you had just a little heat. After the window closed, you were looking to hold till the AM LOW seal. A bid comes in at the 10:00 am news and price was unable to gain a following to the upside. If you held to the seal of the AM LOW, you could have printed a 6 to 8 handle profit. IMPRO: Wyckoff Trader :(10:22:11 AM): Potential seal of AM LOW; window still open (that was the low but the bulls dropped the soap later that day).
Weekly: Price has held the highs nudging up each day. One day left, price and volume are on par for a three-day weekend.
Daily: Price tested the previous day’s low and found a bid. Price traded up to the highs and held. Volume is equal to the previous day.
Technical Position: 15-minute move up probes out of the previous day CASH high. A 35 minute down wave is unable to gain a following. An 80-minute buying wave is unable to gain ground as the selling wave starts to gain a following. A 70-minute selling wave finds a bid a the current low of day as a 10 minute up wave starts to round over as the bid pulls away. 70 minutes later most of the previous day range is retraced. A bid forms. Price is held and a strong close in the middle of the trading range. This indicates on the day, buyers and sellers were equally balanced.
Looking Forward to Friday, September 3, 2021
GLOBEX: After close/settle price held a tight 5 handle trading range and then a push up to the 4545 handle. Currently holding another 3 handle range trading 4541 as I write.
Trade Plan: The 8:30 Jobs Numbers may push the bias to one side or the other. If buying support, then price will need to push through the current high and probe into the 4550 and beyond. If selling pressure, then price may see the 4520 down to 4512 get challenged. Odds are it’s going to be a bullish day.
Offing Events: The debt ceiling was kicked till September. Trillions in the Senate were voted on. A variant of the virus is on the rise. Delta, Lamba is Gamma next? The country is coming undone at the seams. September / October may just be the catalyst for the truth to be revealed. Cyberwar perhaps kinetic looming? Yea that kinda started over the last two weekends.
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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.
Yesterday:
Yesterday Bax favored the first 30 minutes for a low of the day and he was 60% convinced it would be in the AM session overall (least likely the close at 15%). That was incorrect as the low of the day came in just after 14:00.
Bax was pretty sure the high of the day would be in the first 30 minutes. That was an unusual call that both the high and low might come in the first 30 minutes. He was right about the high.
For yesterday, Bax gets one bone for the call on the high.
Today:
For today, Baxter thinks the high for the day is likely to come in between 10:00 and 12:00. The low Baxter won’t call. He has given all four time slots about a 25% chance. The least favored is the last 30 minutes which is just below 25% at 24.7%. So no call on the low.
Chart of the Day
Tencent is cheap enough for valuation expert to buy ADRs
Tencent Holdings Ltd. looks cheap to Aswath Damodaran, a professor at New York University and the author of four books on company valuation. Damodaran wrote about the Chinese internet company in a blog post Wednesday and noted he had bought its American depositary receipts the day before. The Hong Kong-listed shares underlying the ADRs fell as low as 17.7 times earnings in August, according to data compiled by Bloomberg. The price-earnings ratio was the lowest since February 2005. “Tencent is a more rounded company” than Alibaba Group Holding Ltd., which is more undervalued, Damodaran wrote.
Our View
S&P 500: Wash, Rinse, Repeat Ahead of the Payrolls Report
In two straight sessions, we’ve seen stocks rally after the open and sell off later in the day. On Wednesday, the market rallied hard in the first few hours of the day, chopped in a tight range, and then puked into the close, going out around the lows of the day.
On Thursday, the action was similar. The ES rallied to a high of 4544 in the first half-hour but backed off that mark by 10:00. After a slow grind higher, the ES made a lower high of 4541.25 at 11:45.
That’s when the sellers stepped in.
In five of the next six 30-minute trading windows, the ES closed lower, ultimately bottoming near 4422 around 2:00. Following a 10-point pop, the ES pulled back and put in a higher low of 4525 around 3:30.
I know the “Our Lean” section has been somewhat repetitive over the last few weeks — i.e. “sell the early rallies and buy the pullback” — but it has been working pretty well this week.
The early pops just haven’t had the volume to take it higher. And the same can be said for the pullbacks — there just isn’t enough strength to drive the indices lower. Particularly when there’s so much stimulus money floating around from the Fed and from the federal government.
Our View: I just talked about being repetitive with the “Our Lean” section, but guess what? I’m going to sound repetitive about this, too: buying the late-day pullbacks on Thursday.
They love taking down the market on Thursday, to just give it a chance to pop late in the day or on Friday. Sometimes the decline starts earlier in the week and bottoms on Thursday. Other times it starts later in the week. No, it doesn’t happen every week, but when it does, it’s worth a shot.
Case in point? Yesterday the ES bottomed at 2:00 near 4522 and came within three points of that low at 3:30. Yet it went out with a high 4537 at 4:00 and closed the 5:00 window within a point of that mark.
How’s that for a bounce?
Our Lean: The market continues to feel a little tired up here, with its tight ranges and low volumes. But who’s to say when we rollover? The trend is still working in the bulls’ favor.
Our Lean is simple: First and foremost, keep risk at the forefront today. We have the non-farm labor report due up at 8:30 ET and the last thing anyone needs is to take a big loss going into a long holiday weekend.
If we pop on the number, see if the ES can hold up over yesterday’s high, at 4544. Above keeps our 4550 target in play. If it drops, see how it handles the 4420 to 4425 area — yesterday’s support zone. If it breaks it and reclaims it, we could have a long setup in play.
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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