Market Review
Polaris Trading Group: Taylor 3 Day Cycle Commentary Author: David D Dube (PTGDavid)
***Written 7 pm Tuesday evening for Wednesday’s trading
Tuesday’s Session was Cycle Day 1 (CD1): Session unfolded as a “normal” CD1 with price declining during GLOBEX Session fulfilling 3205, CD1 Average Decline. Low (3190.75) was established early during the RTH Session, providing a solid foundation from which to stage this cycle’s rally. Initial range objectives (3217) have been fulfilled, though there still remains ample room for continuation rally.
…Transition from Cycle Day 1 to Cycle Day 2
This leads us into Cycle Day 2 (CD2): Having closed at mid-range of CD1, we then have Two Scenarios to consider.
1.) Price continues higher clearing and converting 3217, targeting 3231 – 3235 3 Day Cycle Rally Target.
2.) Price fails to sustain bid above 3217, violates and converts 3200 to lower resistance, opening the potential for a retest of CD1 Low (3190.75). Failure to successfully hold open trap door targeting 3185 – 3175, CD2 Violation Zone.
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 2
Economic Calendar
Closing Prices
In the Tradechat Room
MiM
Ignore the 15:30 MiM read as there was bad data. Up until the reveal we signaled a sell with decent symbol percentage to that sell-side (-66%). From 13:20 into the close we had a slow fizz sell-off that top to bottom was 16+ points. Our 15:50 reveal was about 2B to sell with a nice 4 point candle.
Reminder: June is Russell 2000 reconstitution month. Here is the schedule for that:
- Friday, May 8 – “rank day” – Russell US Index membership eligibility for 2020 reconstitution determined from constituent market capitalization at market close.
- Friday, May 22 – “query period” begins – preliminary shares & free-float information for Russell 3000 Index constituents are published daily & queries welcomes (query period runs through June 12)
- June 5 – preliminary US index add & delete lists posted to the FTSE Russell website after 6 PM US eastern time.
- June 12 & 19 – US index add & delete lists (reflecting any updates) posted to the FTSE Russell website after 6 PM US eastern time.
- June 15 – “lockdown” period begins – US index adds & delete lists are considered final
- June 26 – Russell Reconstitution is final after the close of the US equity markets.
- June 29 – equity markets open with the newly reconstituted Russell US Indexes.
Questions? Please email me: Marlin@mrtopstep.com
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Chart of the Day
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Globex
| (ESH20:CME) GLOBEX Session | (ESH20:CME) Day Session |
| High 3231.25 | Opening Print: 3227.75 |
| Low: 3189.75 | High 3231.00 |
| Volume: 430,000 | Low: 3190.50 |
| ES Settlement: 3205.50 | |
| Total Volume: 1.68M |
S&P 500; How Long Can The Stock Market Keep Going Up?
The S&P continues to follow its daily pattern of selling off after the open. Yesterday it made an early low of 3190.50 at 9:15 am CT, back and filled and traded up to 3215.00 at 10:08. After the rally, the ES pulled back to a high low of 3199.00 then rallied 20.50 handles up to 3219.50. The ES then pulled back down to 3206.60 (just above the vwap) and then rallied up to another higher high of 3221.25 at 2:26. The ES then sold off down to 3202.25 at 2:52 as the final MIM showed $236 million to sell. The ES settled at 3205.50 on the 3:15 futures close, down 22 handles on the day. In terms of ESs overall tone, the best way to describe it was ‘shaky’. In terms of the day’s overall volume, 1.68 million ES futures traded with 430,000 coming from Globex making total volume on the day session 1.25 million.
DATA/HEADLINES:
8:30ET CPI; 2:00ET Federal Budget, FOMC announcement; 2:30ET Fed’s Powell press conference / Euro-area finance ministers meet Thursday to discuss the EU’s recovery package and Eurogroup presidency succession. The Federal Open Market Committee is all but certain to keep its benchmark overnight rate in a target range of zero to 0.25% when it wraps up its two-day meeting later today. The committee will release a statement at 2 p.m., including a dot plot of its rate projections. The Fed will also publish their employment and growth targets for the first time since the coronavirus outbreak. Estimates are expected to signal a collapse in output this year and near-zero interest rates for the next few years. Investors are waiting to see if Fed officials discuss a possible return to the 1940s-era policy of yield-curve control. Texas, one of the first states to loosen restrictions, saw its second consecutive record day of coronavirus hospitalizations. Cases and hospitalizations are going up again in parts of California, causing the state to place nine counties on a watchlist.
TODAY’S HIGHLIGHTS:
Stocks in Europe erased early gains along with U.S. equity-index futures after the OECD presented a grim outlook for the global economy and America’s top infectious-disease specialist warned the coronavirus outbreak is far from over. The OECD forecast a 6% contraction in the global economy this year, or a 7.6% contraction if there is a second wave of the virus. This is a deeper contraction than the World Bank predicted earlier this week. More than 100 vaccines are in development against the coronavirus, according to the World Health Organization.
EQUITIES:
E-Mini S&P is trading +0.3%, Nasdaq +0.8%, RTY +0.1%, Dow future +0.15%. SPX is holding just below the 2019 settlement. Yesterday saw buyers emerge with the S&P down just 1% as the tiniest of dips are being bought into.
Our View
Nasdaq 10,000
The Nasdaq Composite traded above 10,000 today, the first time ever but failed to close above. Some people say a close above 10,000 would be technically positive but I really do not think it matters. Tech stocks became the leader a few years ago but since the COVID19 outbreak it literally has taken over the tape with most of the gains coming from five stocks… FAANG!! Within the coronavirus stock market rally, the tech-heavy Nasdaq is once again positive for 2020, up 10.9% through Tuesday’s close. Meanwhile, the S&P 500 and Dow Jones Industrial Average are down 0.7% and 4.4% respectively through the June 9 close.
Today is day two of the fed’s two-day meeting. At 2:00 PM ET the Fed will announce its interest rate policy decision. The Fed isn’t expected to take any consequential action but some investors will focus on the health of the economy as it reopens after the coronavirus outbreak. It’s going to be a big day of dips and rips.
I don’t know why I think this but I still get this ‘feeling’ that there is going to be a downturn. I am not saying big sell-off or reversal but a pullback that will ease the extreme ‘overbought conditions’. The PitBull said yesterday that he has never seen the S&P and NASDAQ so overbought but he also said he’s not sure it matters as long as the government and the Fed are printing money. I said the price action is a spitting image for how the ES acted during all the QE in the later parts of the credit crisis. Here are two ways to look at the markets right now 1) they are overbought and the next leg is down or 2) The ES is in another big back and fill pattern and getting ready to take out 3300.00.
Our view, we lean to selling the early rallies and buying the midmorning dip. Then step back and wait for 2:30 and the MIM. It really is one of the ugliest rallies in history!
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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