Disclaimer: For educational use only. I’m not dispensing financial advice. We are having an intellectual conversation (you and I) on the topic of trading the Emin futures using the Lens of Wyckoff Principles and the Eyes of WB’s clock. The clock that controls all turns intraday, every day!
Do I buy a house today or wait for tomorrow? Perhaps in two years when price is lower? That’s on the mind of a lot of consumers. Is this inflation temporary or will it persist? The market is pushing all-time highs, how far will it push? That’s the question on most traders’ minds.
If you traded the first five-minute bar, then you got your stop taken out. If you waited until the second you did ok. After that, all the volatility was sucked out of the market. At the 11:00 am hour price tried to challenge all-time highs but was unable to gain a following to take price higher.
Market Timing: Price popped up and flagged till just after the 10:00 am low hour. News was bad, that did not stop the late bulls. At 11:00 am the high was set. Lunch low held the 10:00 am high. The mid-pm high was early and weak. And last hour low was low.
Weekly: Price tags an all-time high and gets turned away. Holds at the high. Volume is light.
Daily: Price probes for new all-time highs, sets high and gets checked. Supply was not pressing. Price drifted down.
Technical Position: Price held a potential 4 to 6 handle distribution range for an hour and a half between the 11:00 am to 1:30 pm marker. The initial gap was held but was tested at the end of the day. Volume was low around 800K at the close.
It’s summertime trade and earnings season. Price could either hold highs or grind up to higher highs. Wall Street is bullish, those that have the mike or not de-platformed.
Looking Forward to Friday, July 30, 2021
GLOBEX: Has taken out the FED 2:00 LOW and probing for lower lows. Next level is the Jul-27 1:30 low. If that gives way, yesterday’s activity may reflect a terminal upthrust.
Trade Plan: It’s a Friday and the first day of the cycle. Since Jul-23 price has had a potential distribution range of 38 handles. Expect a bid to come in as the longer-term bulls defend the 4370 to 4360 handles. If a news catalyst emboldens the bears you could see price trade down to the 4348 handle and lower. If price looks to regain the highs on a Friday with the pressing news what possible reason besides earnings season could there be?
From last week July 23 opening print:
“POTUS does not seem to be meeting his production goal for vaxed up. The market is grinding up to all-time highs on little to no volume. My concern is, “If we are going to lock down the country this fall, it would make sense for the market to ratchet to all-time highs, wouldn’t it? We could see that big 4400 even soon perhaps next week or today.”
Yea, that kinda happened this week
It’s summertime trade. The delta variant now seems to be taking front stage, but Wall Street has not flinched? RIP bottom to the top Sharp Dressed Man.
Offing Events: The debt ceiling is looking to be raised on the sly by end of July and time is running out. Will the market accept this excess spending? A variant of the virus is on the rise. I’ve heard delta and now Lamba. The country is coming undone at the seams. September / October may just be the catalyst for the truth to be revealed. Cyberwar perhaps kinetic looming?
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No Baxter today. New model next week.
Chart of the Day
Why do stocks cost more in the U.S. than Europe? Blame value
Disparities between the valuation of U.S. and European stocks are more pronounced in cheaper shares than faster-growing companies, according to Drew Dickson, chief investment officer and managing director at Albert Bridge Capital LLP. Dickson cited a comparison of forward price-earnings ratios in a blog post last week. Both the Russell 1000 and Euro Stoxx Total Market growth indexes are valued at 31 times projected profit, according to data compiled by Bloomberg. By contrast, the Russell 1000 Value Index’s forward P/E of 18 exceeds its Euro Stoxx counterpart’s ratio by 48%. Investors seem to be “thoroughly discarding European value,” Dickson wrote.
Markets Tumble on Disappointing Robinhood IPO, Amazon Earnings
The ES sold off down to 4380.50 on Globex, traded back up to 4405.50 at 9:24 ET, and opened Thursday’s regular session at 4403.75 on the 9:30 futures open. The ES then down-ticked to 4402.50 and blasted up to 4415.50 at 9:41. After the low, the ES did some back-and-fill from the 4408 level to the 4413 level and at 10:42 traded 4418.75. It dipped a few points and traded up to a new high at 4421.75.
The ES pulled back down to the 4415.75 level and after a little more back-and-fill, the ES rallied up to a new high by 1 tick at 4222.00 at 12:43. After another 5 to 6-point pullback, the ES made a new high of 4422.50 around 1:35. Every pullback was being bought and that’s when I put this out in the MrTopStep chat:
IMPRO: Dboy :(2:17:10 PM) : getting weak I think
And the ES slipped down to 4402.25 at 3:58 — roughly a 10-handle dip – as the ES closed near its lows of the regular-hours trading session. The ES traded 4413 on the 3:50 cash imbalance as the MiM showed $513 million to sell and traded 4411.50 on the 4:00 cash close.
The weakness continued as it sold off all the way down to 4394.00 at 4:43 and settled at 4397.00 on the 5:00 futures close, up 5 points or + 0.11% on the day. Despite closing green, the ES remained weak into Globex, sporting a low of roughly 4370.75.
In the end, the markets ground higher with the Russell 2000 (RTY) leading the pack higher but started to reverse around 2:15 and got crushed as Robinhood’s (HOOD) IPO price disappointed investors. The stock closed down 8.4%, but the bad news didn’t stop there. After the close Amazon, (AMZN) reported disappointing earnings and the stock dropped $240.00. Twilio (TWLO) and Pinterest (PINS) aren’t helping matters.
In terms of the ES’s overall tone, it opened firm and remained firm later in the day until the fade. “Thin to win” was winning, but reversed sharply. In terms of the ES’s overall trade, volume was low. 99,000 ES traded on Globex and 774,000 traded on the day session for a total of 873,000 contracts traded.
Our View: Well, we got the PitBull’s Thursday low, but it doesn’t feel like the downdraft is over. On the open today, the ES should open at a big discount to the S&P cash, potentially causing big bids to come in. Fair value is 8.00 and the ES went out at a 23-point discount to the S&P cash. You do not see that very often. Here is a link to https://indexarb.com/ — I suggest you follow this closely on the open.
Does that mean the lows are in? I don’t know, but what I do know is selling into big discounts can be very painful.
Our Lean: There are three parts to the trading day.
What happens on Globex
What happens after the 9:30 futures open
What happens after 2:30.
The Nasdaq has been down in 10 of the last 15 occasions on the last trading day of July. And the first trading day of August has been down 15 of the last 23 occasions. The first 9 trading days are historically weak for the month as well. I prefer to get a look at today’s price action before making any trades.
I did say a few days ago that I saw 4335-4350 as the next support area, but the ES will have to break through the 4370-75 support area first. So far, that area’s holding during Globex.
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