There were clues about how the ES may trade lower on Wednesday, as the index dove lower in Globex trading and bottomed at 4497.
Remember yesterday, when we talked about how it broke below 4515 support (along with the 10-day moving average and the prior day’s low), but recovered this area ahead of the open?
The ES opened Wednesday’s session at 4512.50, climbed up to 4520, and reversed. Hard.
The futures flushed lower and took out the Globex low, bottoming at 4492 and bouncing from there. The volatility didn’t ease, but the downside move did, as the ES bounced between the mid-4490s and 4505.
Eventually, it resolved higher, closing at 4513 at 4:00 and ending the day down a measly 0.15%.
In terms of the ES’s overall tone, it was weak out of the gate, but buying the early pullback worked well. In terms of the day’s overall trade, volume was the highest in several weeks at 1.57 million.
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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.
Yesterday Baxter called for the high to come in the last 30 minutes of the day with about 60% certainty and with a 30% probability for the 10:00 to 12:00 slot. The high came in around 10:01 so that 30% call would have been right. No cookie there.
Baxter’s low calls are always iffy. He slightly favored the 10:00 to 12:00 slot and the low came in around 10:55 so that call was correct. One biscuit awarded for the day.
Baxter today has a strong guess of a high during the last 30 minutes of the day. No hedging around today.
For the low, he is not as sure. He likes the first 30 minutes, but the second slot of 10:00 to 12:00 is his 2nd guess.
Chart of the Day
Earnings are seen as S&P 500’s `entire driver’ this year
“Earnings have been the entire driver of market gains” for U.S. stocks this year, Keith Lerner, chief market strategist at Truist Wealth, wrote in a report Friday. Lerner cited a comparison between the S&P 500 Index and analysts’ projected earnings for the next 12 months. While the U.S. equity benchmark rose 20% for the year through Monday, forward earnings climbed 29% in the period, according to data compiled by Bloomberg. The gap reduced the S&P 500’s price-earnings ratio by 1.5 points, to 22.1.
The index futures are starting to roll and that could create a choppy environment over the next few days. We continue to see overnight weakness that’s bid up by morning. In Wednesday’s overnight session, the ES puked and bottomed at 4:00 a.m., and in Thursday’s Globex session, the ES traded all the way down 4485.50, bottoming at 3:30 a.m.
Now back to 4510 as of 8:00 a.m. and these dips are tough to buy when they’re in the middle of the night. Let’s see if we retest the overnight low once the regular-hours trading session comes around.
If it does, keep in mind the 21-day moving average sits at 4481.50, while the prior all-time high and the breakout level sits at 4476.50. If we flush, that may be a dip worth buying. Plus, it’s Thursday and that could give us a chance to rally into Friday and possibly the weekend.
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.
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