Market Review
Taylor 3 Day Cycle
Author: David D Dube (a.k.a. PTGDavid)
Website: PolarisTradingGroup
Tuesday’s Session was Cycle Day 1 (CD1): This day unfolded as a “normal” Cycle Day 1 as the anticipated decline did unfold, fulfilling the Average Decline Objective of 4122. Program Selling persisted all session and was capped-off with a Market on Close (MOC) Sell Imbalance of $1.3 Billion. Range was 68 handles on 1.249M contracts exchanged.
…Transition from Cycle Day 1 to Cycle Day 2
This leads us into Cycle Day 2 (CD2): Normal price action for this cycle day following a directional trend, is for initial continuation of the previous momentum (down), then finding a stabilization zone to consolidate recent activity. As such, estimated scenarios to consider for today’s trading.
1.) Price sustains a bid above 4112, initially targets 4132 – 4140 zone.
2.) Price sustains an offer below 4112, initially targets 4096 – 4093 zone.
*****3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistic covering 12 years of recorded tracking history.
For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:
Link to access full Cycle Spreadsheet >>Cycle Day 2 (CD2)
Thanks for reading…PTGDavid
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The annual inflation rate in the US soared to 4.2% in April of 2021 from 2.6% in March and well above market forecasts of 3.6%. It is the highest reading since September of 2008, amid a surge in demand as the economy reopens, soaring commodity prices, supply constraints. There is also a base effect weighing as the coronavirus pandemic dented economic activity bringing the inflation rate to 0.3% in April 2020. The biggest increases were recorded for gasoline (49.6% vs 22.5% in March), fuel oil (37.3% vs 20.2%) and used cars and trucks (21% vs 9.4%). Inflation also accelerated for shelter (2.1% vs 1.7%) and new vehicles (2% vs 1.5%) and rebounded for apparel (1.9% vs -2.5%), but slowed for medical care services (2.2% vs 2.7%) and food (2.4% vs 3.5%). Meanwhile, compared to March, prices rose 0.8%, the most since 2009 while monthly core consumer inflation increased 0.9%, the most since 1996. source: U.S. Bureau of Labor Statistics
Chart of the Day
GMTT / Chart of the Day / Bitcoin (BTC-USD) / May 19, 2021
Bitcoin (BTC/USD – Two charts, current and late March 2021)
We are reposting our Bitcoin chart from late March where we already predicted a significant correction. Our upside target was at the time 62000. It traded a little higher, just shy of 65000 before it corrected close to 40%!!!
At GMTT we have analyzed Bitcoin for a while and update our view in our three weekly GMTT Research Reports. We gave that our that Bitcoin cancels its technical buy signal below 54700. The question is have we reached a tradable low? BTC/USD reached a projected low. However, to confirm the low we need a close above 43700. Note that – although not likely – below 39000 we will see another leg lower.
Sign up for a free 14-day free trial if you like to stay up to date with our outlook and forecast on Bitcoin but also the many other sectors. In our GMTT Research Report that is published three times weekly, we cover the following: Global Indices, VIX, a selection of stocks, Treasury Bond, Commodities, Soft Commodities, Bitcoin, and Currencies.
Our View
S&P Sells Off As Dollar Weakens, Walmart Reports Slower Than Expected Sales
We knew going into Tuesday that the Ned Davis S&P cash study for the May expiration was bad: up 14 and down 23 of the last 37 occasions.
Also not helping the bulls? Walmart’s sales rose at a slower rate as the pandemic wanes. Further, the US dollar dropped 0.46% to settle at its lowest level since January 6th. Lastly, don’t forget about those inflation concerns.
Lets face it, we live in uncertain times and it’s not hard to spook the markets.
The ES sold off hard, had a big day-and-a-half bounce and now the futures are falling again. The way I see it is, the further the ES and NQ go down and the shorter the crowd gets, the better the buying opportunity. If you played the short side and you have a lead, that’s great!
But I can not sell into a close like yesterday when the ES futures went out at a big discount to the S&P cash. All too many times — or I should say more often than not — the futures rally at least in the first part of the day. Maybe I should be looking for selling opportunities, but I am a firm believer in the two old sayings: “Don’t fight the Fed” and “the trend is your friend.”
My ideal set up is weakness going into Thursday. The best indication you are making the right move buying that weakness? If the futures close firm on Thursday’s close. Sometimes the low comes late Wednesday but if you catch it right all you need is Thursday and Friday.
This is exactly the setup we used a few weeks ago to grab dozens of points on the ES in about 90 minutes.
Oh yeah, the Monday after the May expiration is historically a very positive day: up 26 and down 11 of the last 37. I will post the link to the stats again, as they are worth noting. Ned Davis’ S&P Cash Study
In terms of the ES’s overall tone, there was a decent bounce back up to the 4161 area going into 11:00 ET and the rest of the day it was one sell program after another. In terms of the day’s overall trade, volume was high at 2.6 million contracts traded.
Our view
This Thursday/Friday expiration rip depends on people getting short into Thursday followed by a firm close. According to the Stock Trader’s Almanac, expiration Friday has been up 12 of the last 19 occasions. The ES closed weak and is down ticking right now. The main part of this is not to fight the downside if the ES and NQ do fall again today. Timing is everything. Let the margin calls force the option seller to roll lower and the hedgers to get all hedged up.
We are still well above last week’s low but the futures are down 36 points and the NQ is down 180 points. The CAC, DAX, FTSE are all down over 1%, as are gold, silver, copper, and crude oil. Bonds and notes are lower and Bitcoin is down 3,400 and trading at the 39,800 level. What goes up must come down.
Our lean, I wrote the OP last night but the paragraph above at 6:10 am this morning. As I said; if you are looking to play the expiration you want the markets to fall on Thursday. I know the S&P is weak but I am going to try and buy the early weakness. After that I will 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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