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Polaris Trading Group: Taylor 3 Day Cycle  Commentary      Author: David D Dube (PTGDavid)

Prior Session was Cycle Day 3 (CD3)…Despite the negative news with Apple Computer initially dragging down S&P 500, ES still managed to successfully retest and close above the Cycle Day 1 Low. In doing so, it fulfills the Positive 3 Day Cycle Statistic, which has a 91% historical track record covering 10 years.

This leads us to today’s Cycle Day 1 (CD1)…Normal expectation for CD1 is for some magnitude decline with an average measuring 3355 – 3350 zone, which was actually fulfilled during CD3. So the main question becomes…Was the decline on CD3 deep enough to satisfy market participants to “buy the dip”? If yes, THEN price is likely to continue rallying to recover the CD3 open gap. If no, THEN price may need to retest CD3 Low (3355.25) for surety of a “secure” low. In either case, trading is expected to provide nimble traders ample opportunities for profitable trades. Stay Flexible! Always Honor Stops!

Link to access full Cycle Spreadsheet >> Cycle Day 1

Thanks for reading today’s 3 Day Cycle Report

Good Trading…PTGDavid


Economic Calendar


Closing Prices


In the Tradechat Room

MiM

The MiM was showing sell all the way into the close.  The market didn’t make it real until about 3:15 when we were showing an almost 1B sell imbalance.  About 30 minutes of selling kicked in. A small bounce on the reveal which was just 121M to sell gave some relief and an opportunity for the 3 pm shorters to get out with a little profit. 

If you are interested in becoming part of the closing action you can join.  We do have a 30-day guarantee. You will get access to the MIM, Live Squawk breaking news service, streaming charts, and our new HFT Alerts.  Join the MiM and ride the close. 

HFTAlert

I have been coding version 2.0 of our HFTAlert indicator and, while mostly looking at typescript, I can hear the alarms going off, I don’t quite have the display right.  It was a fairly active day with 22 programs detected, 10 buys and 12 sells. 

Chart of the Day


Top Stories on MTS Overnight:


Globex

(ESH20:CME) GLOBEX Session(ESH20:CME) Day Session 
High 3359.00Opening Print: 3368.25
Low: 3361.25High 3374.50
Volume: 470,000Low: 3355.25

ES Settlement: 3369.25

Total Volume: 1.7M

S&P 500 Futures: AAPLE Globex Dip and European Close Rip

The ES traded down to 3361.25 on Globex in the aftermath of Apple supply line sales slow down. On Tuesday morning’s 8:30 CT open the ES traded 3368.25 and then traded up to 3374.50. After the high, the ES pulled back and chopped around in a three or four handle range and around 9:15 got hit by several sell programs that knocked the futures down 10 handles to the 3362 area. After a small bounce, several sell programs pushed the ES all the way down to a new daily low at 3355.25. The ES then popped up 5 handles to the 3260 area then jetted up above 3368.50, over 13 handles off the low. The ES then sold back off down to the 3365.25 area and then straight up to 3372.50 in just a few minutes after the pullback and then up to new highs at 3375.00.

At 2:00 the ES traded 3372.00 as the early MiM showed $900 million to sell, traded 3371.59 at 2:30 as the MiM showed $507 million to sell and then traded down to the 3369 level. On the 2:50 cash imbalance, the ES traded 3368.00 as the final MiM showed  $719 million to sell, traded 3371.00 on the 3:00 cash close as the ES traded 33 and settled at 3370.00 on the 3:15 futures close, down 18 handles or -0.53% on the day. 

In terms of the ES’s overall tone, it was again all about the news algos running sell stops in the first part of the day and then running the buy stops. In terms of the day’s overall trade, total volume was large, 1.7 million with 470,000 coming from Globex making the total day volume 1.23  million contracts.

Our view: News Algo Price Action

There is a very clear pattern and it’s one we should all abide by. The news comes out bad and the ES sells off on Globex. Things couldn’t look worse, right? Well, that is the way our minds are tuned to think. With the S&P up some 480% since the March 2009 credit crisis 666 low, everyone, including the bulls, is waiting for a crash. The problems with that thinking are three things 1) historically low rates 2) quantitative easing and 3) billions of dollars moving into the US stock market. That said, once the news is out and the selling dries up the algos and high-frequency bots go from running the sell stops to running the buy stops. In a way, it becomes the bots ‘path of least resistance’. 

The February option expiration has the Nasdaq down 13 of the last 20 occasions. I don’t want to be overly bullish or bearish. I  think there is a ‘ton’ of risk out there but we do not see many 2-day pullbacks. Our lean is to sell the early rallies and buy weakness with tight stops. 


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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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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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