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

Tuesday’s Session was Cycle Day 2 (CD2): This Cycle’s decline continued into CD2 with a violation of CD1 Low (2804.25). Price pushed lower throughout the session fulfilling CD2 Violation Level (2734.25), 70 handles from prior low.

  …Transition from Cycle Day 2 to Cycle Day 3

This leads us into Cycle Day 3 (CD3): Having closed low within the range, we have two scenarios: 1.) Violation of CD2 Low (2717.25), extending targeting CD3 Violation Level (2704.50). 2.) Price holds CD2 Low (2717.25), pushing higher on the recovery rally targeting the 2760 – 2775 zone.

Cycle’s Primary Goal is to fully recover CD1 Low (2804.25) for a Positive 3 Day Rally. Unsuccessful attempt will trigger a “failed-cycle” hinting at further weakness in the coming days.

For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:

  Link to access full Cycle Spreadsheet >> Cycle Day 3

Thanks for reading, PTGDavid

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Market was draining into the close.  We expected to have a selling MOC based on the opening and the prices action of the day forcing funds and ETFs to have to sell off.  That was quite quickly paired and that 3:50 pm candle did a quick retrace. Watching this AM, we would expect to see a buying MOO on the open, assuming we hold this overnight gap. 

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Chart of the Day

Top Stories on MTS Overnight:


(ESH20:CME) GLOBEX Session(ESH20:CME) Day Session 
High 2833.25Opening Print: 2764.50
Low: 2747.75High 2777.50
Volume: 200,000Low: 2717.25

ES Settlement: 2732.50
Down 79 handles or -2.81%

Total Volume: 1.9M

S&P 500 Futures: Down 140 Handles From Friday

The ES opened Tuesday’s 8:30 CT futures open at 2764.50. The ES rallied up to 2770.00 at 8:34 and then sold off  down to 2750.25 at 8:39. The ES then traded up to the high of the day at 2777.50 at 8:57 and by 11:45 made its daily low of 2717.25. After the low the ES ‘back and filled’ and then traded up to a lower high of 2754.25 at 1:26 CT. 

At 2:00 CT the ES traded 2735.00, traded 2740.00 at 2:30 and traded 2729.50 as the 2:50 cash imbalance MiM showed $1.4 billion to sell. On the 3:00 cash close, the #ES traded 2730.00 and settled at 2732.50, down 79 handles or -2.81% on the day or down 5.04% in two sessions. 

In terms of the ES’s overall tone, it was negative but not overly.  When you look at it the S&P traded in a narrow range for most of the day. In terms of the day’s overall trade, total volume was 1.9 million contracts traded minus 200K from Globex making total day volume 1.7 million contracts traded on the day session.

Our View

Oil Drop Weighs Down on the Dow, S&P and Nasdaq

After falling below zero during Monday’s crude oil options expiration front-month crude oil fell 43% down to $11.57 a barrel, the lowest close in 21 years. The record low was set at $10.42 back in 1983. I can definitely say I have ‘never’ seen anything like the current price action. It’s not just the oversupply and historically low price that’s shadowing oil it’s also about the energy sector’s job losses and bankruptcies. The stock market has lost a little over 5% in the last two sessions but is still up over 20% from its March lows. 

There was a headline out yesterday that said that China was the only country that would benefit from cheaper oil prices. It’s hard to believe that two months ago we were living large and today we are ‘supposed’ to be locked down in our homes. What’s crazier is Florida and a few other states are opening beaches. I am not a doctor but I fail to see how you stifle the pandemic while opening the economy. The hard truth is after the cases start to level off the hospitals will start to fill up again. We have all read about how China and South Korea lowered their cases of COVID19 but the people of the ‘free world’ would never submit to having their God-given rights taken away even if it kills thousands of people. 

Our view, I called for Monday and Tuesday to be down and I was right. I can call it but putting it to action has not been easy recently. After a 34% drop, the ES rallied for two weeks. Most think there is going to be a retest of the recent lows and lower and I am in that camp but I am just not sure about the timing. The sell-offs of the past two days have for the most part been a buy and with oil down so much it’s bound to rally. An uptick in oil will be a good excuse for the ES to rally. Do I like the ES right now? No. Do I think the ES won’t hesitate to squeeze the shorts out? Not for a minute!  It’s all about running the sell stops then running buy stops. As for oil itself, I don’t believe that oil is going to $1.00 but I do think it’s possible we see $6.00 to $8.00. At that stage, the producers will have to totally turn the spigot off and when that happens oil will start going up again. Our lean is for higher prices today but I think Friday will be down and that we could be setting up for a two or three-week decline. Reality has a way of catching up with the markets. 

Danny Riley is a 39-year veteran of the CME  trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.

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Danny Riley (3588 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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