Premium OP: Monday’s Viral Descent

Commentary, News, Our View, The Opening Print

Market Review

NJ – The Discovery Trading Group

The Covid-19 virus is finally taking a significant bite out of the lofty US stock markets which seem to be resistant to significant pullbacks.  After a gap down open and 3 down days in a row, the ESH20 crashed through its 50-day moving average. It’s been nearly 5 months (Oct 1, 2019) since the ESH20 moved through the indicator.  In the short-term, the ESH20 is now in a down-trend. In the intermediate-term, the bulls remain firmly in control. The next area of significant technical support should be 3181, the ESH20 low of 2020 touched on Jan 8, 2020.  

Volatility has skyrocketed with the ESH20 5-day ATR above 57 ES points.  Volatility should remain high and as the Covid-19 cases outside of China grow, we should expect additional and swift downside price action.  The increased volatility is providing an ample supply of intraday trading opportunities.  

Stick with identifying the intraday trends and find ways to hop on board (e.g. pullbacks or breakouts).  Keep stops relatively tight. You may get stopped out a few times in the noise, but once you catch a trend, it should more than makeup for the small losses.  For Monday, Feb 24, I count at least 11 intraday moves of over 10 ESH20 points. Take advantage while the volatility is high. It’s times like these that offsets the summer months when the entire day’s range struggles with 10 points.  Of course, if the volatility makes you uncomfortable, stand aside. There will always be more opportunities in the future.

Thanks again for reading.  For more information on how DTG can help your trading, visit us at DiscoveryTradingGroup.com


Economic Calendar


Closing Prices


In the Tradechat Room

MiM

Manic Monday rewarded our traders. We had happy weekend shorts and we were able to catch the overshoot on the open to the upside. Our MiM was understating the closing imbalance which ended up being 2.6B to the sell-side. The selling into imbalance started at 3 pm ET.

HFTAlerts

We ended the day with 93 programs, 43 buys and 48 sells. No real direction. The bulk of the business was about 30 minutes into the market with a huge buy program that traded 526 symbols and started a small run to the high of the day, which collapsed spectacularly for a great trade into the lower lows.

Chart of the Day

Largest historical jumps in Vix (Y’day was 13th)

Top Stories on MTS Overnight:


Globex

(ESH20:CME) GLOBEX Session(ESH20:CME) Day Session 
High 3312.00Opening Print: 3232.75
Low: 3230.25High 3360.00
Volume: 1.1MLow: 3213.75

ES Settlement: 3326.25

Total Volume: 3.5M

S&P 500 Futures:  #ES Slides As #CoronaVirus Spreads

I am not going to do a big drawn-out play by play of the ES futures. We all know the seriousness of the coronavirus spread and the slowing of the supply chains. Last week’s weakness in the #ES finally gave away to the effects of the virus. 

There were 1.1 million S&P futures trading on Globex Sunday night to Monday mornings 8:30 CT Futures open. The Globex trading range was 3312.00 down to 3230.25. The ES traded 3232.75 and initially rallied up to the 3260 area.  After the rally the ES made several lows at 3244.25, bounced and made a lower low at 3237.50 and then down to 3231.50, rallied and then dipped to 3223.50. Every rally failed and then finally the ES traded down to its daily low of 3213.75 around 12:15 CT and then short covered up to the 3254 area, 39 handles off the low.  

At 2:00 the ES traded 3248.00, 35 handles off the low as the early MiM showed $377 million to sell and at 2:30 the ES traded 3240.50 as the MiM showed $674 million to sell. On the 2:50 cash imbalance, the ES traded 3236.50 as the final MiM showed $2.57 billion to sell. On the 3:00 cash close, the ES traded 3226.00 and settled at 3227.00 on the 3:15 Futures close, down 111.25 handles or -3.33% on the day. The NQ settled at 9075.50,  down 382.25 points or -3.85% on a volume of 1.15 million. 

In terms of the ES’s overall tone, it was the worst in many years. In terms of the day’s overall trade, total volume was HUGE. Total ES volume was 3.5  million ES traded with 1.1 million coming from Globex making the total day volume 2.4 million contracts traded on the day session.  

Our view: ES 3397 Last Week

Last Wednesday (2/19/2020) the ES traded up to a new all-time contract high at 3397. In four trading sessions, the ES has fallen 4.8% or 184.25 handles for an average loss of 46 handles a session. If you do the numbers from last Thursday or three sessions ago, the ES has fallen an average of 61.3 handles a day. I can not say for sure but yesterday’s volume of 3.5 million ES futures is the largest since the credit crisis. Additionally, the tech-heavy Nasdaq has fallen 6.1% in the last four days. 1.15 million NQ futures traded yesterday, also volume not seen since the credit crisis. The Dax fell 550 pts., down 4% on the day.

Yesterday the 10-year treasury yields fell to their lowest level since July 2016. According to Trimweb, the benchmark 10-year note settled at 1.377% compared with 1.470% last Friday. Carnival, American Airlines, and EasyJet plunged on speculation that more flights might be curtailed as governments try to limit the spread of the epidemic. Gold prices surged 1.7% to $1672.40 a troy ounce Monday, trading at its highest level since early 2013. Apple, Microsoft, Tesla and others dropped sharply as investors reacted to news of fresh outbreaks of the coronavirus that has spread to 28 countries. Oil fell almost 4% to the lowest front-month contract settlement since February 13th. The drop is tied to the drop in global equities and other assets as the rising number of COVID-19 cases continues to spread outside of China as the risk of global slow down spreads. Corn and soybeans fell 2% and wheat fell 3% as the supply remains high and demand is low. 

I really hate being an alarmist. When I started Tweeting out all the stories of the COVID-19 virus last Saturday I knew by the level of stories on the internet and the fact that a section of Italy had been quarantined that the S&P was going to be in trouble Sunday night and Monday and it was. I even put sharply lower ES support levels at 3230-3240 and I am a bull market guy. Let’s face it, the markets have skyrocketed and there are two things overshadowing the markets. The first one is complacency and the other is the fear of the COVID-19 virus. Late yesterday a Harvard scientist predicted that the coronavirus will infect up to 70% of humanity but that most people won’t have severe illnesses or even show symptoms. What really bothers me is that many of these viruses originated in China and I have to keep asking myself why. India has had outbreaks but not even close to the level that China has. Is this just a fluke or is there a military application involved? I think it is connected to the military but like always, China never tells the truth about anything. 

Our view, after such a big drop and ‘most of the news out’ I can not rule out some type of bounce. The ES has fallen almost 5% in the last three sessions and despite the ‘bad’ news, a short-covering rally can not be ruled out. Does that mean the sell-off is over? No, it doesn’t. I think we are in the first inning of what could be a very long game.  When the ES was on its way up, the 3180-3190 area provided a lot of resistance before it was able to break through to the 3200.00 level. This makes my next spot for the ES at 3140-3150 and then down to 3095. I am not saying that it is going to happen soon, these are just some long term levels to watch.


Market Vitals Technical Analysis

Did you know that your premium membership gives you access to our Market Vitals? Click on the image below and get today’s key levels.

Click to access today’s values

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.

Follow MrTopStep in our Social Space:

Danny Riley (3463 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.


(Visited 29 times, 1 visits today)

Leave a Reply