Market Review
The Discovery Trading Group
Friday’s coronavirus induced selloff erased all of the S&P 500 gains for the year while the S&P 500 e-minis (ESH20) bounced off its 50-day moving average, setting up the inside day that unfolded Monday. Price action became a tale of two halves. The ESH20 shot up nearly 30 points from the open to top out at 3257.25 before capitulating and giving back 25 points over the course of the morning. During the afternoon, the ES settled into a 10-point range, waiting for something to give it some direction.
The coronavirus continues to spread, offsetting strong first-quarter corporate earnings. Meanwhile, the political circus of the Trump “non-trial and highly partisan” impeachment could be coming to a close as early as tomorrow. Volatility should remain high for today.
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Closing Prices
In the Tradechat Rooms
The MiM
The MiM started early neutral and as I checked in during the closing hours you could see a steady build to the sell-side. That build caught the attention of the market around 3:30 pm and there was a steady 20 minutes of selling set up. At the 3:50 pm reveal, when it all becomes real, a 1.3B sell imbalance had already been sold off.
HFT Alert
The HFTAlerts monitor picked up a sizeable count of program trades, 47. They were mostly to the sell-side with only 13 buy programs and 34 sells.
Economic Calendar
Chart of the Day
Top Stories on MTS Overnight:
- Tuesday: BEA Vehicle Sales
- Hong Kong reports virus death as workers strike at hospitals
- Solid Start to February as Stocks Stage Partial Rebound
- Tesla’s stock surge adds $13.5 billion to Elon Musk’s fortune, the biggest increase for anyone this year
Globex
| GLOBEX Session | Day Session |
| High: 3250.50 | Opening Print: 3239.00 |
| Low: 3222.00 | High: 3267.25 |
| Volume: 543,000 | Low: 3237.75 |
| ES Settlement: 32 | |
| Total Volume: 1.86 M |
S&P 500 Futures Beginning Of The Month ‘Short Squeeze’
The ES initially sold off on Globex Sunday night down to 3222, rallied all the way up to 3250.50 and opened Monday’s regular session at 3239.00. After the open, the ES rallied straight up to 3264.50, pulled back down to the 3258 area and then marched up to a new daily high at 3267.25 going into 9:30 am CT. After the high, the ES sold 3247.50 and then the ES traded in a 5 handle range for the next 2 1/2 hours and made a low at 3245.25 and rallied up to 3252.50 just before 2:00. At 3:00 the ES traded 3250.50, up 23.50 handle as the early MiM showed $134 million to sell. The ES traded up to 3255.00 just before 2:30, traded 3246.00 on the 2:50 cash imbalance and the final MiM showed 1.36 billion to sell, traded 3246.25 on the 3:00 cash close and settled at 3245.75 on the 3:15 futures close, up 21.75 handles or +0.67% on the day.
In terms of the ES’s overall tone, the futures acted good but I think most of it was short covering. In terms of the day’s overall trade 1.86 million ES traded with 543,000 coming from Globex making total day trade volume 1.48 million on the day.
Our View: Oil Falls Into A Bear Market
Our view, the S&P may have bounced yesterday but oil futures fell over 2.8% to $50.11 a barrel, down more than 20% from its January high and to its lowest level in a year as concerns of the coronavirus outbreak will cut China’s oil purchases Crude oils benchmarks continued to drop into bear market territory despite Saudi Arabia cutting production.
On Friday the S&P had its worst drop since August and wiped out all of 2020’s gains but Monday’s bounce pushed the index back into positive territory for the year. My own feeling is the decline is not over and yesterday’s rally was more short covering than new buying. That said I do not think the S&P is out of the woods yet. The ES tends to do what will screw most trades and right now that’s to continue to rally. As of yesterday’s close 425 people have died, there are 3,235 new cases in China from the coronavirus and 20,500 have been infected.
In most cases, the big ETF funds buy stock in the first few days of the new month and with so many people off-base I am not sure the rally is over yet. Our view is to sell the early rallies and buy weakness. 3275-3280 is an upside target we are looking at and on the downside 3230-3235 should act as good support.
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.
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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