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!
Looks like Penelope might get run over by that train, cause Tonto and The Lone Ranger are nowhere in sight. Wyckoff would often say, don’t walk away from the market cause you never know what will happen in the third reel…
The bulls played hard and fast getting price back up to the 4412 handle. By lunch, they gave it all away. Some blamed it on the Algos. I blamed it on the upthrust after minor distribution. A 25-minute buying wave with a 23-minute down wave at 12:30 pm. Followed by a 30-minute upwave that wet beaked the high of day.
It was the lunch SLOG. What did you think was going to happen? In the third reel at 2:30 pm, The Lone Ranger and Tonto showed up and rescued the stuck Penelopes and saved the day for the bulls printing a wet beak high 15 minutes before the closing print!
“This was from last Friday; It was all-time high: Trade Plan: Even not knowing the clock most traders would be saying the bulls will need to hold their gains. This day is susceptible to bulls getting themselves overbought and bears finding chinks in their armor. It’s a wild card day. A day, Straight Up / Straight Down, or just a Chop tilt.”
Yes, they ran it up like an upthrust after distribution, and then the “Hurt Locker” opened up over the weekend. The market told us we just didn’t know what it knew.
Weekly: Probed for a low and found it. Currently closed in the middle third on greatly increased volume.
Daily: Probed the lows of Jul-22 and found a strong bid. Volume highest of past 22 days. Indicated potential further upside progress.
Technical Position: Nothing but net. Price opened at lows and rallied for 50 minutes. A 30-minute pull back to the halfway rally removed all doubt. The buying support was the path of least resistance. A quick 20-minute up move to absorb supply. Then a 20-minute buying wave gets checked at the halfway retracement of the previous day. A 50-minute area of distribution checks the rally and a 90-minute selling wave finds an oversold technical position as shares leave the weak and enter the strong hands. And a 70-minute buying wave gets wet beaked at the current high of day. Price is indicating potential absorption of weak stuck traders at the highs. Potential for further move to the upside.
Looking Forward to Friday, August 20, 2021
IMPRO: Wyckoff Trader :(3:15:05 PM): Is the market going to let Globex do the heavy lifting tonight? IMPRO: trader :(3:15:43 PM): great idea Wyckoff… all the Asian traders that sold…. guess what they will have to do 🙂 IMPRO: Wyckoff Trader :(3:16:08 PM): exactly!
GLOBEX: Price is drifting down from the 4312 highs. Currently trading 4390 handle. One would hope the 4380 is defended and held. If not, the potential for Jul-19 5:15 am Globex test around the 4350 handle.
Trade Plan: Are we going to be able to take out and hold this 4412 handle that is our main concern? If price can eat through up to the 4440 handle, we might see price overcome the wall of worry back to the all-time highs. If price falls through 4380 defend the 4350 handle.
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 last weekend.
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Chart of the Day
Lowe’s narrows biggest P/E gap to Home Depot since 2001
Quarterly results from the two largest U.S. home-improvement retailers helped close a valuation gap that has been years in the making. Shares of Lowe’s Cos. ended Wednesday at 17.2 times projected earnings after climbing 9.6% on fiscal second-quarter results, according to data compiled by Bloomberg. The forward price-earnings ratio was 4.5 points lower than the corresponding P/E for Home Depot Inc., whose second-quarter report sent its stock to a 4.3% loss Tuesday. Lowe’s forward P/E discount to Home Depot this month reached 6.3 points, the biggest shortfall since August 2001.
Our View
S&P 500: How Long Will Buying The Dip Work?
The Fed started its quantitative easing programs in 2009. You can call the S&Ps artificial, but you can’t call the ~560% rally from the credit crisis lows fake. Like it or not, the buyers continue to buy the dip and that doesn’t look like it’s going to change anytime soon. Admittedly, the markets have had some big selloffs and have even crashed during the August to October timeframes in certain years. But that does not mean we can expect it year in and year out.
After trading down to the 4381 area late Wednesday, the ES initially rallied on Globex up toward 4400 and then dropped 52 points down to 4347.75. The “water in the bathtub” kept moving from there, with a short-covering rally up to 4373.25, followed by the ES opening Thursday’s regular session at 4365.75, down about 22 points on the day.
About an hour later, the ES traded up to 4403.50, up almost 40 points from the open. Following some midday chop, the ES gave us a lower high at 4412.75 and then dropped 37.75 points down to 4377.50 at 2:33.
The next move was a rally to 4414 at 3:36 as the MIM started showing $400 million to buy. The ES dipped under 4400 and traded 4402.50 as the 3:50 cash imbalance flipped from $270 million to buy to $320 million to sell, and settled at 4403.25 on the 5:00 futures close, up 8.75 points or +0.20% on the day and up 55.50 points from the Globex low.
In the end, Thursday’s trade saw more 10- to 30-point rips and dips than I have seen in a very long time. I am sure the elevated VIX had something to do with it. In terms of the ES’s overall tone, it rallied hard, fell hard, and ended the day on a firm note. In terms of the day’s overall trade, volume was high. Globex volume was 437,000 and day volume was 1.475 million for a total volume of 1.912 million futures traded.
Our View
I shook off all of the choppy trading I have been going through the last few days and followed my game plan in The Lean. I bought the open, got in and out, and did well, but I am still long 2 ES from yesterday’s open near 4365.Our Lean: I do not think all the shorts have been smoked out yet and I can’t rule out selling some early rallies. However, I think there is a good shot at 4430 to 4440 today. If the futures get up there, I am getting out.
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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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