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!
Is stagflation on the horizon or are we there yet?
In looking at the beginning of September. Labor day Friday was a half a day. That set the high. Just a little pop up then a drift down. That was the Vesica Piscis of this down move. The contract changed. The Fed made decisions. Bonds started to rise and yada, yada, yada – look where we are today.
It’s a new month. It’s a new day. It’s the end of the cycle. Traders were hoping for 4450/4500 did/will they get it? The government is open till December. It only took 3 billion to get a wall built and now, we are looking at 6 billion for refugees…
How does the street think about that? Discount retail stated they are passing the costs (not savings) on to the customer. Is this a top or do we have one more leg up? That’s what the trader in the seat is thinking.
Perhaps it was the end of the quarter and option selling. Perhaps it was the JPM collar or just Jim Cramer’s last day at TheStreet. Whatever the reason, traders should have been short and not looking to catch that proverbial falling knife…
1250 contracts and more gave it up at the 4340 handle and 30 minutes later we were looking at the low of day around a 97 handle. Yes, it’s DC politics and selling pressure that took the market down yesterday.
Looking Forward to Friday, October 1, 2021
Is Globex going to stair-step this down 50 more points? The bulls took a whooping in the woodshed during CASH. Could see air pockets on the way down. Today is an S4L day and it’s not a good day for the bulls. That is unless price is too sold out and everybody expects a rip on the first of the month after a hard down day…
Best to wait and see and let price tip its hand. Trade what is happening, not what you think might happen.
Offing Events: The debt ceiling was kicked till December. Trillions are waiting to be 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.
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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.
Reopening signals seen in U.S. financials, Treasury yield
“There are signals that markets may be anticipating the next stage of economic reopening,” according to Ryan Detrick, chief market strategist at LPL Financial LLC. Detrick made the comment in an LPL blog post Wednesday that cited the relative strength of U.S. financial stocks and the yield on 10-year Treasury notes, among other gauges. The ratio between the S&P 500 Financials Index and the S&P 500 rose 5.2% through Tuesday from this month’s low, set Sept. 8, according to data compiled by Bloomberg. At the same time, the 10-year yield climbed 0.2 percentage point to 1.54%, the highest since June.
MOC Sell Orders Piling Up Over The Last 4 Sessions; Hits $13.4 Billion
I think you know I am not at all surprised by yesterday’s weakness. The last trading day of the third quarter was exactly like I said a few days ago: buy bonds and sell stocks. We may read about stock market money flows, but we get that information every day using the MrTopStep imbalance meter.
In the last 4 sessions, the total amount in MOC selling is $13.4 billion. What do you expect to see when you see this type of selling?
While I confess to being a bull market guy, I have also written about the overall changing tone and that the stock market was trying to balance too much news in front of what I said was going to be a very important day — the last trading session of the 3rd quarter. Further, each morning rally has been being sold, something we’ve pointed out for weeks now. That’s definitely a shift from the “buy the morning dip” attitude we’ve seen for months.
After a 95-point drop on Wednesday, the ES had another 94.50 drop. The Globex high was 4389 and the day low was 4294.25 late in the day.
I am not going to do a big play-by-play.
The ES opened down, rallied in the first few minutes then reversed hard. Every 10 to 30 point rally was being sold. I said early in the day that if the MIM was big for sale, the ES would fall hard and at 3:18 the ES traded up to the 4341 area as the MIM was showing over $2.5 billion to sell, and over the next 40 minutes, the ES fell 46.50 points.
The ES traded 4313 as the 3:50 cash imbalance showed $6.3 billion to sell, traded 4297 on the 4:00 cash close, and settled at 4302.50, down 58 points or 1.33% on the day.
MiM total for the first 4 trading sessions this week:
Monday Sell $2.1 billion
Tuesday Sell $2.8 billion
Wednesday Sell $2.2 billion
Thursday Sell $6.3 billion
Total: $13.4 billion
It’s hard to think that all this selling has not had an impact during the end-of-quarter rebalance. And when you add in the weak historical stats and taper talk, it’s just turned into one big sell program. In terms of the ES’s overall tone, it’s been beyond bad. In terms of the day’s overall trade, 2.23 million futures traded, which doesn’t seem that high for the size of the selloff and given that it was the last day of the quarter.
While September marked the worst month for the S&P since March of 2020, the ES actually eked out a +0.2% gain for the quarter, marking its 6th consecutive quarterly gain. The ES closed out September down almost 5% with most of the loss in the last 4 sessions and down 5.1% from its closing record last reached on Sept. 2.
The ES also closed Thursday below its 100-day moving average for the first time since November 2020. All I am going to say is that while October is known for its crashes, it’s also known as the bear killer and making big lows. Can the ES sell off more? Sure it can, it’s still up 14.5% on the year. Do I think we see a low in October? 100% I do!
Our Lean: The ES just sold off from 4310 down to 4270.25 in one big woosh. One thing we know is the big institutions, mutual funds, and ETFs have been selling. The question is, for how long? This sounds crazy, but the ES could fall all the way down to 4200 or even down to 4100, but I don’t think it’s going to go that far. If it does, I am going to start buying January calls. Keep in mind, the 200-day moving average is currently at 4131 and is rising.
My guess is we see another big bounce today, I’m just not sure it will hold. Remember, it’s the first trading day of the new quarter and they could put money back in today.
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