Market Review
On Friday, the non-farm payrolls report for August was reported. In the month, 235,000 jobs were added, badly missing expectations of 720,000. Despite it being a jobs day, we barely had 1 million contracts traded on the S&P futures (ES).
That’s as we entered the long three-day holiday weekend, with Labor Day keeping the stock market closed on Monday. The market struggled to find its footing on Friday. After a late-day puke on Thursday, the futures climbed late in the session and through Globex.
On Friday, the ES bounced in a wide range, topping out at 4549.50 just after the jobs report was released. Even though the action was short-lived, many in the room were prepared with limit orders scattered within a few points of the high, as we have been talking about the 4550 level more and more lately.
We had a very wide range pre-market after the jobs report, with the high of 4549.50 being matched with a low of 4528.50. Hey, a 20-point range is something in this tape! After 9:00, the ES took out the low and bounced off Thursday’s low near the 4522 area. Remember, we were watching Thursday’s low as a possible pivot area to trade against.
It worked.
Shortly after the open, the ES dipped down to 4519, bouncing from the week’s VWAP measure and spent the rest of the day rallying. The ES topped out at 4540 in the 3:00 block, giving us a lower high going into close.
The ES closed at 4534 at 4:00 and finished within a quarter-point of that mark at 5:00, roughly flat for the day.
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In the TradeChat Room
Market On Close: Pre-Labor day MOC was $511M to buy.
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SpyGate: AM session has some action then it was a light chop into the close.
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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:
For Friday, Baxter thought the high for the day was likely to come in between 10:00 and 12:00. That was not correct, the high came in around 15:00. The low Baxter didn’t call. No bones for Baxter on Friday’s call.
Today:
For today, Baxter thinks the high for the day is likely to come in the last 30 minutes of the day. The predictions for lows are always a lower percentage of certainty with our current models which lean today for a low in the AM session and most likely in the first 30 minutes of the day.
Chart of the Day
Our View
With the action, it makes you wonder if the jobs report is good or bad for the S&P 500. It was well below expectations, which should force the Fed to back off its taper talk. At least for a month. On the other hand, we need to see a stronger recovery in the labor market.
Our View: The ES broke out at the end of August and has bided its time since. On the upside, 4556 remains a reasonable upside target, with 4600-plus in play above that. On the downside, the 4515 to 4520 area has been support for the last several days, while the 10-day moving average continues to catch up. This measure was support on Aug. 27, which spurred the most recent push to all-time highs.
From here, let’s stick with the trend and buy the dips. In the last four sessions, the ES has pushed above 4540, but has failed to close above this mark. For those that want to play the two-way action, they can try to sell the early rallies above this mark. But if the ES can sustain above it, then 4550-plus is on the table.
If that’s too complicated, then simply stick with the trend and buy the dips until support fails. Then we’ll have to reassess.
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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