Using the context of the new administration, who can do no wrong and what’s going on in the offing events tied to the earnings season? Here’s how I saw yesterday’s market using the principles of Wyckoff and through the eyes of WB.
The stimulus is coming. Sure, we don’t get $2K as promised in the campaign speech, it’s been whittled down to $1,400 with limitations on the rich. Mom was not happy when she heard that. She said; “That does not come close to compensating me for being locked up in the house for a year and not being able to go to church on Sundays…”
I agreed. She was looking to buy a hearing aid with that. And she needs a higher db level. So the Eargo not an option. The market, that’s different. They are going to rally on this and any good news. And rally they did!
We had a strong close the previous day. And Globex tested the low of RTE CASH and then rallied up to settle. Not a bad way to start out the day. In the Wyckoff Wave, price opened up at the close and danced around the high. After the opening balance price chooses a direction and it was higher highs.
CASH and EMINI followed suit only they had further to go from the previous day’s high. The opening balance was evenly balanced then but by 9:50 to 10:00 that was easily overcome and the price was on the rise. I had the 3843 so we took a little profit on the reaction. By 10:20 it looked like a temporary top had been found and if you were looking to get in on the pullback you didn’t have long to wait.
Price pulled back to the 10:40 handle and if you had a bid you were in for a move to higher highs. Your notion for getting long might have been a pullback to the 3/8 (0.38) of the day’s move from low to the current high of day.
If you were looking at floor trader pivots you might have seen that 3842 and a nice place to get in and out at the next floor of the 3857 handle. The move up was 45 minutes and the reaction was 20 minutes as the bid came back in.
It was a slow grind up all day as price ended at the high of day. Looking through WB’s eyes. Not much to say it was an S1H day and he has gone fishing today… I took a look at Berkshire and a 7 lot came in on 353,890.32 at 11:16 and 23 lot on 355,000.00 at 13:19 marker. Do the math on that.
Looking Forward Friday, February 5, 2021
The last fifteen minutes of yesterday’s close ended on increasing volume as price started to expand to the upside. Soon after Globex took it to higher highs, 3869, 3873, and 3877 as I currently see it.
Big jobs number today along with earning releases. Trump’s impeachment starts next week. What could go wrong with that? Without looking at expansion ratios WB might have pulled it out of his hat, potential for higher highs tomorrow.
If there is buying pressure due to the jobs number today, we could see the low in the morning and the high in the afternoon as yesterday showed. It’s a Friday, you got the scare the bulls and the book square. We’ll have to see if NY city CASH agrees with the value Globex that put up price and perhaps is over their skies this morning.
Let’s look at the 7:30, 8:00 and 8:30 a.m. marker interest as the boys in Manhattan get off their helipads.
I give you the best of the old school market technicians, JP Morgan, Herriman, Kearn, and Livermore. The traders of the 1930s. How they may have seen the market. I use the lens of Richard D. Wyckoff Principles and Procedures and through the eyes of WB’s hidden internal clock. The clock that controls all turns intraday every day.
We had a good week this week. Our subscribers have been very lucky with the levels given: Even Monday, -2 points, Tuesday, 23 points Wednesday, and 4 points Thursday. Total for the week 25 points, which would be $1,250 on 1 lot and $3,750 on 3 lots. That’s due to the volatility that crept back into the market. I’ll be the first to say, it does NOT happen every week. When it does it’s a beautiful thing!
I would love for you to join us. If you have not taken the time, now would be a great time for you to subscribe. After you subscribe drop me an email at email@example.com we’ll set up a time to talk and help you discover how using WB’s clock can give you the gift of timing that you need in your trading life.
In the Tradechat Room
These days it seems like you are running a short fund against Reddit traders. The MOC was a decent size (-1.2B) but no real lean and that meant “mark ’em up, boys”. This reflation market has just one direction right now and that is up.
Checking in on the end of the week on our vaccination progress we see that Israel and the US have both had considerable dropoffs indicating most likely that vaccines themselves have become constrained although the UK and UAE seem to be finding doses.
Encouraging news is starting to come out of Israel over the effectivness of the vaccine. Here is a recent article from JP Post talking about both reduced infections and symptoms from the Pfizer vaccine.
Wear your masks! Stay at least 10 feet behind someone wearing a mask! (Particularly in a checkout line) Stay home! Take your Vitamin D!
Chart of the Day
The dollar rose on Wednesday for the fourth day in five, hitting a more than two-month high.
The global reserve currency is rising as part of a “reflation trade.” Reflation occurs when fiscal and monetary policies are put in place to increase economic output and remove uncertainty following a recession which perfectly describes the current situation.
Yields are rising as investors sell Treasuries on the expectation they will be able to buy new issues with higher interest rates in the future. Treasury prices and yields are inversely correlated, so when the price of Treasuries falls, yields rise.
(ESH20:CME) GLOBEX Session
(ESH20:CME) Day Session
Opening Print: 3832.25
Total Volume 1.0 M
S&P 400 Futures Recap – Trade Date January 4, 2021
New All Time Highs
After trading in a 24.25-handle overnight range, the S&P 500 futures opened Thursday’s cash session at 3832.25, traded a 3830.50 daily low and then began to rally through the morning hitting a new intraday high in every half-hour interval until the 3557.75 print was made just before 2:00 CT. After pulling back 5.5 handles to 3552.25 in the final hour, heavy buys came in during the closing minutes pushing the index to the daily high of 3868.50 before settling at 3867.75, up 44.25 handles on low volume barely hitting one million contracts. In terms of price action, it was all about buying the open and holding into the close.
S&P 500 Futures New All Time Highs #ES 3920.00 On TAP
As I ‘tried’ to explain in yesterday’s Opening Print, after the sell-offs the shorts get used as upside fuel by the ‘cash buyers’ which are constantly buying and High Frequency Trading (HFT). I have always insisted that when the ‘crowd’ gets offsides, the bot’s know. The ES made a 3658 low on Sunday night and after the close and the 4:40 reopen, the ES made another new all time contract high at 3869.75. The futures have rallied 214 points in 4 days, a gain of 53.5 handles a day. It’s really been a perfect storm, the S&P made its 6th record close in 2021. The markets were already on the upswing yesterday but after fresh data showed the number of people seeking unemployment benefits declined from the previous week all the markets got an extra push.
Our view, today is jobs Friday. It’s my guess the non-farm payroll comes in lower than expected. If the ES gaps sharply higher with Globex volume of 300k to 400k our lean would be to sell the open or the first rally above the gap up. If the trade works, I want to be patient. I am not saying this is going to happen but the rule is to hold until late in the day. I understand it’s counter-trending but if the numbers are good and the futures do run up it’s my guess a lot of buying power gets used up before the open.
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.