Market Review
The ES traded down to 4382.25 on Globex after the non-farm payroll number showed 193,000 jobs vs. the estimated 500,000. On the 9:30 futures open, the ES traded 4400, hit 4403.25 a few minutes later and traded down to 4385 going into 10:00 am.
After the high, the ES “dropped and popped,” making several lower highs and higher lows until a flush down to the early low at 4385 at 10:44. From there it rallied back up to 4397.50 at 11:15. After “popping” back up to 4401.50, the ES made a series of lower highs that pushed the futures down to 4376.25, 31.5 points off the high of the day. After the low, some short covering gave bulls 3 or 4 points. However, that was followed by 9 separate buy programs that pushed the futures up to the 4398 area at 2:40. That rally ended up failing though.
The ES traded 4386 as the 3:50 cash imbalance showed over $2 billion to sell and traded 4384.75 on the 4:00 cash close. After 4:00, the ES sold off down to 4376.75 and settled at 4380.50, down 9.75 points or -0.22% on the day.
In the end, there were a lot of rips and dips if you were willing to get in and get out. In terms of the ES’s overall tone. it acted tired and the jobs number didn’t help — every rally was sold. I’m not sure ‘Scary October’ is over and neither is the PitBull.
Economic Calendar
Columbus Day Holiday – No Events Scheduled
Closing Prices
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Market On Close: Decent end of week selling but no real lean.
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SpyGate: All sessions were sells, but market was reluctant to go lower.
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Baxter
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.
Last Trading Day:
High: ~09:30
09:30 – 10:00 > 90% (right)
Low: ~13:20
12:00 – 15:30 >90% (right)
Today:
High:
09:30 – 10:00 61%
12:00 – 15:30 17%
15:30 – 16:00 18%
Low:
10:00 – 12:-0 >90%
Baxter is not so sure about today’s high.
Chart of the Day
S&P 500 `big five’ profit pessimism is seen as excessive
Earnings estimates for the S&P 500’s “big five” companies are too pessimistic, according to Nicholas Colas, co-founder of DataTrek Research LLC. He drew the conclusion in a report Thursday that compared analysts’ earnings-per-share projections for the latest quarter with results for the previous three months. Analysts expect all five — Amazon.com Inc., Apple Inc., Facebook Inc., Microsoft Corp., and Google’s owner, Alphabet Inc. — to have quarter-to-quarter profit declines, according to data compiled by Bloomberg. “Estimates seem too low just based on what these companies reported,” Colas wrote.
Our View
The Week Ahead:
Key economic data will include the U.S. consumer price index for September on Wednesday morning, along with the FOMC minutes release at 2 p.m. Further, JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS) kick off earnings this week starting on Wednesday.
Our View
A few things scare me, the first of which is oil. The commodity has risen 25% since last August. According to Goldman Sachs strategists, oil prices have a “roughly neutral” effect on overall corporate earnings, with every 10% increase in Brent prices boosting S&P 500 earnings per share by 0.3%. JPMorgan strategists say the markets will be able to digest oil at $130 a barrel, as the economy and consumer “were functioning just fine” over 2010-15 when oil averaged above $100.
“We do not believe that the current price of energy will have a significant negative impact on the economy,” the strategists wrote.
That may be true, but when you look at the yield on the 10-year note and the weakness in the bond market, I think there is reason to be concerned. The other part of this equation is the cost of goods and the supply chain, which all point to one word: INFLATION.
That all said, there is no other place to invest but the stock market and there are trillions of dollars waiting on the sidelines.
Our Lean: I still think higher prices are on the way, but as I have said, I’m not convinced “Scary October” is over. Most of the lows come around the options expiration week. It’s 7:30 Monday morning and the ES just traded 4367.25. According to the Ned Davis S&P cash study for the Mondays before the October options expiration (today), they have been up 26/down 11 of the last 37 and the Nasdaq has been up 24/down 13 of the last 37.
My guess is if we open down hard with 350k or more minis traded, you’re supposed to buy the open or the first dip. The question is whether the rallies will hold. I think if you are dead set on buying, you wait till the Thursday low.
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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