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Polaris Trading Group: Taylor 3 Day Cycle  Commentary     

Author: David D Dube (PTGDavid)

Prior Session was Cycle Day 1 (CD1)…PTG Daily Trade Strategy (2.11.20) we wrote: “Price closed last and in upper quartile of session range with strong momentum. Expectation is for continuation of this momentum until CD1 Penetration Zone is fulfilled which has occurred during overnight trade.” 

Bull Scenario: IF Bulls hold bid above 3360, THEN initial upside targets 3365 – 3368 zone.”

Price, in fact, fulfilled the initial target zone and climbed higher to 3373 Standard Deviation Extreme Target, at which time the Cycle Day 1 Decline began. This leads us to today’s Cycle Day 2 (CD2)…Part of the decline from extreme high is in place, therefore normal for CD2 would be for some “back ‘n fill” consolidative price action holding above CD1 Low (3349.25). Larger degree uptrend remains in effect and should price convert to the 3365 handle, Bulls can reassert momentum to retest all-time highs. IF price violates and converts CD1 Low (3349.25), THEN some cracks would develop with an expected deeper pullback in search of renewed buy interest.

Screenshot of Cycle Day 2 Spreadsheet

Economic Calendar

Closing Prices

In the Tradechat Rooms

The MiM

Buying MiM all the way into the reveal.  Nice sell sequence setup at 2:45 pm ET and then from 3:20 on it just slipped sideways into the close.  Our 3:50 reveal went up to 685M to buy and then at 3:55 pm paired back to just 336M. Uneventful.

HFT Alert

Light day for program trading as we just kind of hovered into those highs waiting for a shoe to drop or a boot to kick us up.

Chart of the Day

Top Stories on MTS Overnight:


(ESH20:CME) GLOBEX Session(ESH20:CME) Day Session 
High 3367.25Opening Print: 3366.25
Low: 3349.25High 3374.50
Volume: 260,000Low: 3351.75

ES Settlement: 3357.75

Total Volume: 1.43 M

S&P 500 Futures: Slower Trading Helps Updraft

The ES traded up to 3367.25 on Globex on a total volume of 264,000 and traded 3366.25 on Tuesday morning’s 8:30 CT futures open. It sold off down to 3359.25 and then did its usual – rallied straight back up to 3374.50 at 9:35 am CT and right around that time I put this out in the MrTopStep forum IMPRO: Dboy :(9:36:11 AM): “I think we are at or near the early high” and the ES sold off down to the 3360.00 area at 10:40 CT and that is when I put this out in the forum : IMPRO: Dboy :(10:41:53 AM): “I think the sell program is nearing an end, I think we bounce now” and the ES traded up to the 3369.50 area at  12:15. After the push back up the ES pulled back to the 3365.50 area, bounced a few handles, and then dropped back down to 3360.50. After bouncing back to the 3364 area the ES sold back off down to 3357.50 and then back up to a lower high at 3363.50 and then down to new lows at 3351.75 at 2:20 just as the early MiM showed $126 million to buy.  

At 2:30 the ES traded 3356.25 as the MiM showed $258 million to buy, traded 3356.00 at 2:50 as the final cash imbalance ended up $681 million to buy. On the 3:00 cash close, the ES traded 3357.00  and then traded 3357.75 on the 3:15 futures close, up 5.5 handles or +0.16% on the day. 

In terms of the ES’s overall tone, the Nasdaq continues to lead the markets until after 1:00. In terms of the day’s trade, a total of 1.43  million futures traded with 260,000 coming from Globex making the total day volume only 1.17 million futures traded.

Our view: #ES 3374.40

I think ES 3400 is in the cards. Will it happen today or tomorrow?  I don’t think so, but it is coming. What the ES needs now is to pull back and then ‘back and fill’ for a few days. Yesterday the Nasdaq’s short call sellers rolling higher and optimism about the containment of the coronavirus pushed the ES to another new all-time contract high. Ray Dalio, the billionaire founder of Bridgewater Associates, said that the impact of the coronavirus outbreak on the markets has been exaggerated and is likely to be short-lived and that investor concerns over the pandemic “probably had a bit of an exaggerated effect on the pricing of assets because of the temporary nature of that, so I would expect more of a rebound.” 

So far the biggest impact has been on commodities such as natural gas, crude oil, copper, pork and prices for some natural resources as China is canceling orders. Since January 17, when China reported the severity of the outbreak, Brent crude has dropped 16%, copper has dropped 10%, iron ore is off 11%, and natural gas has fallen to its lowest point since August 2009, down 20%. In Shanghai, the world’s busiest port, tug and trucking operators said only about half of the staff that usually load and unload cargo were back at work. I am not an economist but it seems to me that the disruption could have a long-lasting effect on the global economy.

I think the ES needs a few days of rest time. Our overall lean is to take a go-slow approach. Based on yesterday’s late-day price action today could be a sell the rallies day but if volume is low the ES will rally. I am going to leave it at that.

PitBull: clh osc  -13/-26   turns up on a close above 4886   esh osc   22/5  turns up on a close above 335291    vix osc -11/10 turns down on a close below 1475

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Danny Riley (3473 Posts)

Danny Riley has worked in the futures and options industry for 38 years, including the CBOT’s bond room, where he worked for several of the Market Wizards. He went on to build the largest volume desk in the S&P 500 Index Futures, serving some of the largest banks and hedge funds, the UBS program trading business, and some of the world's top individual traders. As a leader and co-creator of the MrTopStep IM-Pro Trading Room, he shares trading ideas and breaking market news live from the floor with our other professional traders and new traders eager to experience the power of collective intelligence. Join us today and get the edge only social trading can give you.

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