Tuesday’s Session was Cycle Day 3 (CD3): Price fulfilled 3 Day Cycle objectives and failed to expand above CD2 high, which attracted sellers, pushing price down to 4364 range low. Range was 51 handles on 1.541M contracts exchanged.
…Transition from Cycle Day 3 to Cycle Day 1
This leads us into Cycle Day 1 (CD1): Average Decline Projection Zone (4374 – 4372) was fulfilled during prior CD3 pullback. With the FOMC Meeting on tap, anything goes for today’s session, as price is currently within yesterday’s value range. As such, estimated scenarios to consider for today’s trading.
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No Baxter today. New model next week.
Chart of the Day
S&P 500 history points to anticlimactic big-tech earnings
Having the S&P 500 Index’s “big five” companies all report earnings this week may be more of a burden than a blessing, according to Carter Worth, head of technical analysis at Cornerstone Macro LLC. Worth highlighted the equity gauge’s performance in similar weeks since 2015 in a Twitter post Monday. The S&P 500 has been little changed to lower when the big five — Amazon.com Inc., Apple Inc., Facebook Inc., Google owner Alphabet Inc. and Microsoft Corp. –- have all released quarterly results.
Turn Turn Around Tuesday, S&P and Nasdaq Snap 5-Day Winning Streak
The ESU21 traded down to 4390.50 on Globex, traded back up to 4411.75 at 7:45 AM, traded 4403.50 on the 9:30 ET futures open, made a high of 4404.00, and then got hit by a series of big sell programs as the Nasdaq led the markets lower.
After an early drop down to the 4390 level at 9:48, the futures rallied back up to a lower high of 4401.25 and, after a few short-covering rallies, the ES made several lower lows down to 4384.25, rallied back up to 4395.50 just after 11:00, and 45 minutes later traded down to 4372.50. The ES again short covered up to another lower high of 4383.25, traded down to a new low of 4368.25, rallied 10 points up to 4378.25, and then dumped down to a 4365.75 ‘double bottom’ at 1:30 as the NQ made new lows down to 14774. Over the course of the next 2.5 hours both markets rallied, the ES to 4388.75, up 31 points off its low and the NQ rallied up to 14968, 194 points off its low. The ES pulled back down to the 4382 level at 3:42 and popped back up to 4390.00 just after the MiM came out at $718 million to buy. On the 4:00 cash close, the ES traded 4391.50 and then shot up to 4395.50 as (AMD) and (GOOG) beat revenue forecasts. The futures dipped before (AAPL) reported upticks and then sold off down to 4383.50 and settled at 4388.75, down 21 points or 0.5% on the day. The Nasdaq saw its largest one-day decline since May.
In the end, all three major averages snapped a five-day winning streak. In terms of the market’s overall tone, it was weak but tech-driven. In terms of the day’s overall trade, volume was steady but not large considering the day’s action at 1.53 million contracts traded.
Our View: Today is going to be a test of the market’s ability to ‘hold’. It’s day two of the Fed’s two-day meeting and it’s also the Robinhood IPO day. It’s very possible that when Fed Chairman Powell’s comments hit the tape the markets will buckle.
Our lean is to take a defensive posture. If the ES gaps higher or rallies early we want to sell into it. Use stops and if you get hit, outsell it again. Be prepared for ‘rips & dips’
I understand that when I am only playing the red side of the card the risk of getting run over increases but I don’t this the selling is over.
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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