Tuesday’s Session was Cycle Day 1 (CD1): Price declined to Violation Zone (4329 – 4323) finding responsive buyers. Range was 48 handles on 1.258M contracts exchanged.
…Transition from Cycle Day 1 to Cycle Day 2
This leads us into Cycle Day 2 (CD2): Price rallied to 4365 resistance during CD1 Session, but could not hold bid and faded back down. Potential is high for price to retest the CD1 Low (4317.25) before this cycle’s rally can be sustained. External factors influencing price action are the Core CPI release this morning and options expiry at week’s end. As such, estimated scenarios to consider for today’s trading.
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Last Trading Day:
High: ~12:05 10:00 – 12:00 >90% (wrong, but missed by only 5 minutes)
Low: ~16:00 10:00 – 12:00 >90% (wrong)
High: Unsure best guess 15:30 – 16:00 33%
Low: 12:00 – 15:30 > 90%
Chart of the Day
S&P 500’s latest earnings pre-season brings losing record
U.S. companies have some ground to make up as they start releasing third-quarter results this week. What might be called earnings pre-season for the S&P 500 Index didn’t go that well. Out of 21 companies that reported in the four weeks ended Friday, only nine saw their shares rise on the first trading day, according to data compiled by Bloomberg. The entire group lost 1.2% on average and had a median decline of 0.7%.
Apple Cuts iPhone Production, S&P Down 3 Sessions In A Row
The ES sold off down to 4317.25 on Globex at 3:00 am and traded 4365 at 8:36 am before opening Tuesday’s regular session at 4360.75. After the open, the ES traded up to 4365 and at 9:48 traded 4339.
After the low, the ES rallied up to a lower high at 4359 and then dropped down to the 4341 area. From just before 10:00 to 11:30, the ES chopped in a 10-handle range from 4342 to 4352 and then popped back up to the 4359 area. After that, the ES continued “chopping around” but held above the VWAP at the 4347.25 level until around 12:00 when a big buy program hit.
The ES traded down to 4346.25 at 11:55 and at 12:07 traded 4365. The ES rallied back up near the VWAP around 4346.75, then “double-bottomed” 4341.25 and rallied up to 4359.75 before slowly edging back down to a higher low at 4342.50.
The ES traded back up to the VWAP at 4347.50 at 3:15 as the MIM showed $512 million to sell and then to a new low for the day at 4340.75. The ES rallied up to the VWAP at 4347.50 a few more times as the MIM increased to over $665 million to sell and then sold off down to a new low at 4331.75 at 3:48. The ES traded 4333.50 as the 3:50 cash imbalance showed $1.268 billion to sell and short-covered up to 4344.75 and traded 4340.25 on the 4:00 cash close.
After 4:00 bulls were hit by a headline that said: AAPL *REPORTEDLY EXPECTS TO PRODUCE 10M FEWER IPHONES THAN INITIALLY PLANNED AS SUPPLIERS BROADCOM AND TEXAS INSTRUMENTS STRUGGLE TO DELIVER SUFFICIENT CHIPS.
That pushed the futures down to another new low at 4327.75 at 4:03, made a new low at 4326.25, and settled at 4328.75 on the 5:00 futures close, down 67 points or -0.51% on the day. The Nasdaq futures (NQZ21:CME) closed at 14,597.25, down 103.25 points or -0.70%.
In the end, it was an extremely choppy trading session. As I said in the MrTopStep trading forum, the price action continues to be “sell the rallies.” In terms of the ES’s overall tone, it was weak. In terms of the day’s overall trade, volume was steady at 1.26 million contracts traded.
Aside from trying to read your charts, don’t you get the feeling that something isn’t right? The S&P just can’t hold the rallies. Is that going to end soon? I don’t know, but I still think you let the ES fall into Thursday, especially if it’s weak late in the day. There is also concern about today’s CPI number. If there is one economic indicator that has the potential to scare the S&P, it’s the CPI number. Today’s focus will be on the consumer price index (CPI) and the Federal Reserve’s taper timeline. Based on how powerful the headline news algos have been, I expect another big day of dips and rips. Tell me I’m wrong but it feels like our world is shrinking!
Our Lean: I can’t rule out buying a lower open, especially with the ES going out at a 20-point discount to the S&P cash. But after the late drop, the ES could short-cover first on Globex. The money trade has been selling the rallies the last 3 days. My guess is we rally after the open then sell off again. How you get from point A to B is your deal. Looks like 4300 is on TAP.
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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