What a week this has been. I’ve been talking about seeing selling for weeks. And now they are blaming the demise of the bid on the bonds. Last check was 1.446% comes to mind. Truth is, it appears the Tech Heavy is losing its shine or its appeal. By my eye, this started just after the changes in the past few weeks…
Yesterday’s open looked to be a ploy to lure the younger bulls in to the fray. Just after the first 10 to 15 minutes, supply started to enter in and selling pressure ruled. That is until the 10:10 marker. That was a forty-minute decline.
Next came a 110-minute rise that took just shy of three times longer to regain what was lost. Once again, supply became dominant and just cut through bids like butter. All the way down to the 3720 handle. That’s a 121-point down day!
Here’s a video if you want to invest forty minutes of your valuable time:
It talks about how using a clock and the duration of rallies reactions can help time your trades so you can hold them longer for greater profits!
Looking Forward Friday, March 5, 2021
The daily is looking more interesting as we scale down that wall of worry. Awaiting on the “Free Money” to be released. And the death counts are almost non existent. That is except for the card kept in one’s pocket of a very powerful man I’m told. The Spring Equinox is March 20th. By my recollection that was the date the virus counts were more mainstream public knowledge. At least that’s when they shut down the barber shops. (I started the count on January 12, 2020)
Will we ever recover? Chances are, no. It’s like a scar that never heals after surgery. You just get used to looking at it so much that it becomes a part of who you are. The market already gained everything it lost from last year’s February and more. From two / three weeks ago we lost all the levels I gave. Trading 3751 as I write.
The low is 3720 handle. Sure, 3706, 3685 then 3658 handle. If price gets to dip those levels, we should see some activity. Especially the 3658 handle. What happens if we loose that? Sad if/when the DOW swings 500 points. Devastating if you are on the wrong side.
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: 14 points Monday, 12 point, Tuesday, 30 points Wednesday, and 40 points Thursday. Total for the week 96 points, which would be $4,800 on 1 lot and $14,400 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!
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In the Tradechat Room
MiM & SpyGate
Wild day in the roller-coaster markets. The MiM was showing sell all the way and the markets took off at 14:00, did the 15:00 drop, and set up for a 20-point trade into the close. The MOC at 15:50 was 1.3B to the buy-side but NQ was a drag as it had a sell imbalance.
The US is making real strides in scaling up its vaccine program, now vaccinating over 0.6% of the population everyday.
That shows up in the overall doses administered daily as we have hit the 2M per day number needed to make President Biden’s goal of 100M vaccinated in 100 days. The flow of vaccines from the manufacturers is starting to pick up and we will begin to find the logistic bottlenecks and the unwilling.
Israel continues to lead the world, now with over 40% of the population fully vaccinated. The US is inching toward that 10% number.
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
Smaller U.S. companies no longer have the appeal they did through much of last year, according to Andrew Garthwaite, a global equity strategist at Credit Suisse Group AG. Garthwaite cited a surge in the ratio between the Russell 2000 and S&P 500 indexes in a report Wednesday. The ratio climbed as much as 31% since Sept. 30, according to data compiled by Bloomberg. The surge enabled U.S. small-cap stocks to catch up with an earlier increase in the Institute for Supply Management’s new-order index, an economic gauge, Garthwaite wrote. He called for investors to cut small-cap holdings in Europe as well as the U.S.
(ESH20:CME) GLOBEX Session
(ESH20:CME) Day Session
Opening Print: 3814.25
Total Volume 3.1M
S&P 500 Futures Recap – Trade Date March 4, 2021
Largest Volume Since June
After a 44.50-handle overnight range, the S&P 500 futures opened Thursday’s regular session at 3814.25 and raded an early 3837.75 high on the open before selling down to an early morning low of 3788.00 at 9:15 CT, bringing in buyers who would push the index futures to the daily high of 3842.25 just after 11:00. From there, heavy sell pressure would come in over the next two hours leaving heavy sell pressure on the index through the late morning and noon hour, printing a daily low of 3720.50 just before 1:00, a 121.75-handle reversal from the highs. The remainder of the session would get a lift up to the afternoon high of 3776.50 early after 2:00 before going on to settle at 3772.25, down 42.50 handles on oversized volume of 3.1 million contracts traded. In terms of price action, it was all about selling the late morning high and flipping in the early afternoon.
Once again, the same story continued with the Nasdaq being the laggard of all markets, closing down 1.82% and now technically in correction mode. For the S&P 500 futures, the next large technical area to the downside is the February low of 3656.50 which is also a 10% retracement where the large cap futures would reach correction territory.
Fed Chairman Powell: Fed Might Intervene If Financial Conditions Do Not Improve
The S&P 500 futures have shrugged off a lot over the last 12 years. The Federal Reserves ‘zero borrowing cost’ has been a key element to the ‘buy the dip’ price action. Over the last two fed meetings Chairman Powell has insisted that the Federal Reserve would keep rates at zero for the next 1 to 2 years but as yields have ground higher over the last three weeks it appears the fed seems to be changing its mind. Before Mr. Powell’s interview with the Wall Street Journal’s Job Summit, the yield on the 10 -year note rose from 1.479% before the start of his speech and settled at 1.547%. Powell noted that “the recent increase in Treasury yields had caught his attention” and suggested the Fed might intervene if overall financial conditions tighten further” and as more headlines hit the tape the S&P crashed. Powell started to speak at 12:05 ET and at 12:09 the S&P futures (ESH21:CME) traded the high of the day at 3842.25. Then the headlines started to hit the tape and the futures started falling. At 2:06 ET the ES traded down to its daily low of 3720.50, down 122 points in just over 2 hours.
I do not pretend to know everything there is about stocks but there is one thing I know for sure and that is when everyone piles into the hot stocks and people are making money hand over fist there is a saturation point. Fast money tends to come fast and disappear even faster. Many of the people that trade the hot stocks have no problem buying them, the problem arises when it’s time to get out, they do not know how to sell. Millions have been wiped out in people’s stock accounts and it’s not over.
Our view, bonds are falling and the dollar is rallying and there is a high level of risk off going on in the stock market. Today we will get a look at the February jobs number. According to Goldman Sachs, non-farm payroll should increase to 225,000 and leave the unemployment rate unchanged at 6.3%. As you may recall, Zero hedge had a story earlier this week that JP Morgan was looking for 675,000 NFP which I do not see happening. Jobs Fridays after big moves can create big counter trend moves. In most cases, the MrTopStep rule is to fade the gaps. If the ES gaps sharply lower we would look to buy the open and vice versa if it gaps sharply higher. These opening trades work best when Globex volume is over 400,000 contracts. If the trade starts going your way you’re supposed to hold until late in the day but I say take it if you get good early profit. As for me? I had one of my best trading days of the year and I always get smoked on FRYDAYS so I am going to do my best to trade small if I do trade at all.
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.