Premium OP: Fed Cut Crash & Burn

by Danny Riley
on March 4, 2020

Polaris Trading Group: Taylor 3 Day Cycle  Commentary 

Author: David D Dube (PTGDavid)

Prior Session was Cycle Day 1 (CD1)…Price extended early rally as Federal Reserve instituted a surprise 50 bps rate cut, only to fade late in session to close near lows, producing a normal CD1 decline.

This leads us into today’s Cycle Day 2 (CD2)…Price found solid buy response within 3 Day Central Pivot Zone 2990 – 3000 and has rallied 70+ handles overnight to the upper end of prior value zone. Bulls have solid control with upside projections above 3100 targeting 3137 – 3150 zone. Volatility remains elevated, so be sure to use “Active Stop Strategy”.

Link to access full Cycle Spreadsheet >> Cycle Day 2

Good Trading and Honor Thy Stops!

PTGDavid

Market Review

I was not surprised at all the federal reserve lowered rates yesterday. They basically telegraphed it last Friday and Mnuchin backed it up by his comments yesterday. I am sure all his old buddies at Goldman got the note Friday. 

The ES traded in a 54.50 handle range during Monday’s Globex session, the low was 3045.50 and the high was 3100.00 (early) with a total of 725,000 futures traded which is low compared to what we have been seeing. On Tuesday morning’s 8:30 CT futures open the ES traded 3093.50. At 8:42 the ES traded 3077.00 and then sold off down to 3046.75 and rallied up to 3056.50. At 9:00 the fed lowered rates and in one minute the ES rallied up to 3127.25. From 9:05 to 9:15 the ES traded 3137.00, just over a 50% retracement. After the high, the ES sold down to 3067.25 and then rallied back up to 31111.25 and then sold off down to 3105.00 at 10:01. Then a huge sell program crushed the ES all the way down to 3023.50 at 10:26 am. The ES rallied back up to 3081.00 and then dropped all the way down to 3011.00 going into 12:30, a 126 handle drop from the 3137 high of the day. After trading 3011 the ES rallied up to 3031.00  and then back down to 2999.00. After a pop up to the 3006 level the ES sold off down to new lows at 2973.00 at 1:09 and then traded up to the 2992 area. The ES pulled back down under 2974 then shot up to the 3008 level then back down to the 2982 level.

At 2:00 the ES traded 3007.00 as the early MiM showed $1.2 billion for sale and 4 minutes later the ES was trading 3025.00. At 2:30 the ES traded 3034.00 as the MiM showed $954 million to sell. On the 2:50 cash imbalance, the ES traded 3006.00 as the final MiM showed $3.5 billion for sale. On the 3:00 cash close, the ES traded 3054.00 and settled at 2997.00 on the 3:15 futures close, down 74.75  handles or -2.43% on the day. 

In terms of overall tone, the ES could not have looked better after the fed lowered and could not have looked worse after it sold off 160 handles from its high. In terms of the day’s overall trade, total volume was high at 3.6 million with 725,000 coming from Globex making total day volume 3.075 million contracts traded on the day session.  

Economic Calendar

Closing Prices

In the Tradechat Room

MiM

Go big go early, MIM showing over 1B to sell. The 3:30 pm candle saw selling followed by a strong 3:40 pm buying candle that is 20+ points.   Reaction to the actual 3.5B sell reveal at 3:50 pm was fast to the downside, with buyers coming in and chasing it back up into a flat close that mimicked the flat MiM at 3:55 pm. 

Get the skinny when we get it.  Join the MiM. 

HFTAlerts

Constant programs during these big swings.  Almost 1K programs, 554 Buys and 436 sells.

Chart of the Day

Traffic congestion levels in Beijing.  Returning to normal
Chart: Tom Tom

Top Stories on MTS Overnight:

Globex

(ESH20:CME) GLOBEX Session(ESH20:CME) Day Session 
High 3100.00Opening Print: 3093.50
Low: 3045.50High 3137.00
Volume: 725kLow: 2973.00

ES Settlement: 2997.00

Total Volume: 3.6M

Our View

#CoronaVirus In 12 States

After the Dow rallied 7% off the lows all the bulls came out of the woodwork. You didn’t hear a peep out of them when the ES broke 3000.00 and under 2900.00 it was like they crawled under a rock but when the big rally occurred from Friday to today’s rate cut high they were all tooting their horns. I’m a bull guy but the coronavirus is going to continue to weigh down on the stock market.

Our view, as the week rolls on and the coronavirus spreads throughout the US and the number of people getting it increases, the death rate will go higher. This will not read well for the stock market. TraderDace @realtraderdave has had a great feel of the ES and said yesterday when the futures were above 3100 that we would see ES 2900 this week. He bought last Friday’s sell-off and the spoos rallied 120 handles in an hour. That said, I have to agree with him. Our lean, we do not doubt the ES can bounce but we want to sell it when it does.  

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.

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