Market Review
Our thoughts and prayers go out to anyone who may be affected/infected by the devastating virus that is spreading. Last check, 98,440 infected with at least 3,387deaths. That’s up 528 from last Friday.
PREVIOUS DAY — THURSDAY, March 5, 2020
On March 5 price opened at 3044 6/8, 69 handles down from settlement.
Worry was that the virus has spread out to other parts of the world. The USA comes to mind. We had two cases reported in my great state and town Denver Colorado. Somebody from out of the country wanted to ski… I guess they got too far over their skies and were airlifted to Denver General.
Conferences have been closed. Airlines are hurting. The service industry is hurting. 3M chemicals and Johnson and Johnson are cleaning up so to speak…
The market is on a constant tear in search of a bottom since the high of March 3, putting in lower highs in search of the low made on February 28th. Yesterday had the earmarks of an S1H day. That is until the day started.
Traders are having to use bigger stops, some are using 10 handles. Overnight Globex ranges are spanning 100 handles with Real-Time Daily 144 to 164 as a rule. Sure we had a great week and outstanding day, as traders that is. For everybody else, perhaps not so much. It was the best of times, it was the worst of times comes to mind.
The E-Mini was unable to get out of the range of distribution from the previous day, even though we closed above it in the end. Yesterday’s trade was lifted up to that high and then started to decline at the 11:30 marker.
From the chart above you can see the top chart the Wyckoff Wave and the bottom E-Mini. Notice the divergence? The rally (E-Mini) up to the 11:30 marker tags the halfback of the previous day while the Wyckoff Wave is on its third retest since the open.
And after that, a series of rallies to lower highs ensues. The day ends out of the range of the previous day and Globex is currently down 68 handles from the low of yesterday. Reality seems to be sinking in and we are trending downward on constant volume.
Yesterday was an S1H and that was flipped to an S1L day. Not a bullish picture. The day prior was a great day for the clock and the Wyckoff Wave.
For more detail please review the Market Recap Video:
LOOKING FORWARD — FRIDAY, March 06, 2020
By my eye, I’m seeing the Composite Man getting out from under that massive volume of size he picked up on Feb-28 lows. This is during the overnight Globex secession and Cash RTE. Since we put in that high of Mar-3 at 3131 and retested it again on Mar-4 with a wet beak of 3129 handle. Currently, we are working off that downtrend supply line and have tested the low of Mar-3 and going lower.
Sure that ideal test would have been on Mar-2 at the 2903 low, until then we’ll have to see if / when price gets a bid…
My notion is providing overnight Globex does not get price too oversold, ideal is constant volume as price keeps trending down lower with rallies to lower highs. It is a Friday. Some traders will desire to even up their trades. Some traders may get margin calls from their broker that will need shoring up?
As you can see this is issue number 622. I’ve written 622 issues and have given our faithful subscribers over 4,344 points to date with 628 trades since August 8, 2018. Just this week our subscribers have been very lucky with the levels given: 14 points Monday, 38 points Tuesday, 47 points Wednesday, and 61 points Thursday. Total for the week 160 points, that would be $8,000 on 1 lot and $24,000 on 3 lots.
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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Economic Calendar
Friday:
• At 8:30 AM ET, Employment Report for February. The consensus is for 175,000 jobs added, and for the unemployment rate to be unchanged at 3.6%.
• Also at 8:30 AM, Trade Balance report for January from the Census Bureau. The consensus is the trade deficit to be $47.7 billion. The U.S. trade deficit was at $48.9 billion in December.
• At 3:00 PM, Consumer Credit from the Federal Reserve.
Closing Prices
In the Tradechat Room
MiM
Get the skinny when we get it. Join the MiM.
HFTAlerts
Another active day, but still way down from a couple of days ago. 211 total programs with 113 buys and 96 sells.
Chart of the Day
Top Stories on MTS Overnight:
- Oil Slips As OPEC Suggests Output Cut To Combat Coronavirus
- Cruise passengers off California await virus test results
- Market Gives Back Most of Yesterday’s Rally… Again
- Nicox Announces 2019 Financial Results and 2020 Key…
- USDA Improving Services to Provide More SNAP…
- Will Coronavirus Impact Industrial Metals Markets?
- NCSC Releases Advisory on Securing…
- FDA Advances Work Related to Cannabidiol Products…
- February Agricultural Options Update
- These are the top 5 UK financial institutions ranked…
- Friday: Employment Report, Trade Deficit
Globex
| (ESH20:CME) GLOBEX Session | (ESH20:CME) Day Session |
| High 3113.75 | Opening Print: 3047.00 |
| Low: 3031.50 | High 3082.25 |
| Volume:540k | Low: 2996.50 |
| ES Settlement: 3015.50 | |
| Total Volume: 2.55M |
S&P 500 Futures: #ES ‘Wild Ride’ Up 4% Wednesday / Down 3% Thursday
Headline Hell:
- BETHLEHEM PUT UNDER LOCKDOWN DUE TO CORONAVIRUS CASES — ISRAELI MEDIA
- PALESTINIAN PRESIDENT DECLARES STATE OF EMERGENCY OVER CORONAVIRUS FOR 30 DAYS
- PALESTINIAN AUTHORITY CLOSES ALL SCHOOLS AND COLLEGES FOR 30 DAYS – PRIME MINISTER
- ADVISER TO IRAN FOREIGN MINISTER DIES FROM CORONAVIRUS: TASNIM
- LA COUNTY CA REPORTS 4 NEW CASES OF COVID-19 – CBSLA
- SEATTLE & KING COUNTY REPORTS 20 ADDITIONAL COVID-19 CASES
- PENCE SAYS U.S. DOES NOT HAVE ENOUGH CORONAVIRUS TESTS TODAY TO MEET ANTICIPATED DEMAND GOING FORWARD
On Globex, the #ES traded up to a high of 3113.75 early Wednesday night and sold off down to 3031.50 just before yesterday’s 8:30 CT futures open. The first print on Thursday morning’s 8:30 futures open was 3047.00 and the ES shot up to an early high at 3062.25 and then reversed down to 3035.25 and then rallied to a new high at 3067.50 and back down to the 3047 level at 9:40, then all the way up to 3082.25, then all the way down to 3011.50 and then traded up to 3038.00 at 12:36. After the ‘pop’ the ES sold off quickly down to the 3024 level and then made a series of low lower highs and then traded down to the low of 3096.50 around 2:30 CT.
At 2:00 the ES traded 30 as the early MiM showed $760 for sale. At 2:30 the ES traded 30 and on the 2:50 cash imbalance, the ES traded 3111 as the final MiM showed $ to buy and the ES then shot up to 3129.00 at 2:58. On the 3:00 cash close, the ES traded 30 and settled at 30 on the 3:15 futures close, down handles or -3% on the day.
In terms of overall tone, it was weak all day and goes back to what I pointed out yesterday: after a big up move comes a big down move or vice versa. In terms of the day’s overall trade, total volume was low at 2.55 million with 540,00 coming from Globex making total day volume 2.010 million contracts traded on the day session.
Our View
#ES Volume Erodes The ‘BOTs’ Are Eating Each Other Up
Let’s face it, none of us have ever seen anything like the big swings of the S&P 500 futures over the last three or four weeks and there has to be a reason for it. Sure there were some mammoth moves during the 200 tech bubble and the 2007 credit crisis but we never saw the ES rally 130 or 140 handles in a day then drop 100 or 120 the next day, it’s just unheard of. While not everyone trades the S&P futures (ESH20:CME) they play a huge role in the US stock markets with hundreds of billions of dollars exchanging hands each day. The Wall Street Journal said that ‘for reasons that aren’t fully clear, liquidity in the E-mini market has been unusually depressed during the past two years. It eroded to near-record lows during the coronavirus-fueled selloff of late February, and it is still thin—a sign of potential turbulence going forward’
My thought process is simple… as the S&P continued to climb it did so in a very orderly fashion. The pullbacks were short and the turnarounds were fast. Shorting the #ES became a very difficult trade making it very one-sided. In a nutshell, as the buyers continued to push the index higher the sellers could no longer fight it and they stepped aside. Additionally, the VIX trading at 12 or 13 only added to the low volatility trade. According to Deutsche Bank data, ‘For most of 2017, the average number of E-mini contracts available to be bought or sold within a tight band around their current price, corresponding to a one-point move (1 handle) in the #ES, hovered between 3,000 and 6,000 contracts’. But over the past two years, that number has rarely climbed above 2,000 contracts. Last Friday, it fell to just 163 contracts—down more than 80% from a week earlier—before slipping even further, to 132 contracts, this last Tuesday. I have a theory about this; over the last few weeks there has been a high level of institutional hedging that helped push the #ES volume up to 3.5 million contracts a day to a high of 5.5 million. After the hedges were put on the only thing that was left was the retail. As the risk went up and the retail traders took a step back, or fewer humans traded, the only thing that was left was the algorithmic and high-frequency trading (HFT) and the bots have started eating each other. There is no way the thousands of programs can exist without individual traders or non-algorithmic trading. It’s how the bots exist.
Market Vitals Technical Analysis
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As always, please use protective buy and sell stops when trading futures and options.
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