Market Review
Last week I presented 4 possible scenarios for how the week could unfold. Scenario #3 was as follows:
If the 2965 resistance holds or price starts heading down from Monday’s close, expect a retest of the 2770s support area. Good chance the area between the 2965 resistance and 2770s holds the ESM20 for another week sans some news that changes trader expectations.
The 2965 resistance held last Monday’s high and the ESM20 sold off Tuesday through Thursday before starting a rebound. As expected, the 2770s were tested on Thursday (the low was 2760.25) but not cleared. The rebound tested 2965 on Monday, May 16 (the day’s high was 2964.75; can’t get much closer than 1 tick) fulfilling the expectation that the ESM20 would stay in the 2770 to 2965 range. Since the ESM20 remained in the range, the possible scenarios for next week are nearly identical to last week’s:
1. If the 2965 resistance can be cleared, the 3090s significant resistance should be reached.
2. If the ESM20 can clear the 3090s, it should move to the 3175 area.
3. If the 2965 resistance holds or price starts heading down from Monday’s close, expect a retest of the 2760s support area. Good chance the area between the 2965 resistance and 2760s holds the ESM20 for another week sans some news that changes trader expectations.
4. If the 2760s are cleared, the bears may get aggressive and we will see a significant move down, possibly below 2500.
Good chance the bulls try to take the ESM20 higher and at least probes 2965 resistance which continues to align with the 50-day moving average.
Volatility increased over the last week fueled by Coronavirus US economy recovery fears and which were then calmed by Fed Chair Jerome Powell. Expect volatility to decrease as long as the ESM20 continues to move up. An initial move above 2965 could be volatility expanding, but once the range breakout happens, volatility should calm back down.
Below is a snap of the ESM20 daily chart with the above support and resistance numbers marked for reference. Thanks again for reading. For more information on how DTG can help your trading, visit us at DiscoveryTradingGroup.com
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MiM
The MiM was flashing a sell imbalance pre-reveal between 3:00 pm-3:50 pm. The actual MOC at 3:50 pm was closer to zero, a neutral reading with just 58% of the symbols having buy imbalances. That reading offered no bullish support and was traded as weak and the market fell almost 20 points into the close. A weak close on a very strong day. Still the day closed with 90% green volume making it an official 9:1 up day.
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Globex
| (ESH20:CME) GLOBEX Session | (ESH20:CME) Day Session |
| High 2933.75 | Opening Print: 2927.00 |
| Low: 2846.75 | High 2964.75 |
| Volume: 410,000 | Low: 2925.25 |
| ES Settlement: 2944.50 | |
| Total Volume: 1.72M |
S&P 500 Futures: Fed And COVID19 Vaccine Powered
The ES traded 2933.75 on Monday’s 8:30 CT futures open, traded up to 2938.00 and then dropped down to 2923.25 at 8:54. From 8:55 to 9:35 the ES traded in an 8 handle range then made a new high at 2952.75 at 10:09. The ES slowly sold off down to 2942.25 at 11:43, pulled back down to the 2938 level and then traded up to 2957.75 at 1:45.
At 2:00 CT the ES traded 2955.00, traded 2959.75 at 2:33 and traded 2961.25 on the 2:50 cash imbalance as the MiM showed $140 million to buy. On the 3:00 cash close the ES traded 2946.00 and then settled at 2944.50 on the 3:15 futures close, up 3.2% on the day.
In terms of the ES’s overall tone, the futures powered higher off of comments from the fed and word that Moderna’s has had positive results with its COVID19 vaccine. In terms of the days overall trade, 1.72 million ES traded with 410,000 of the volume coming from Globex making total day volume somewhat low at 1.3 million futures traded on the day session.
Our View
Is The Fed Buying Stocks?
The Fed is barred from the purchase of stocks but several economists and market analysts say that if conditions deteriorate the Fed could ‘venture into the stock market’ and such a move would likely be in the form of a big ETF that tracks the major market indexes. Up to now, the Fed has stayed away but if it did decide to purchase stocks it would need to get congressional approval first. For years it’s been said that a secretive branch of the government called the Plunge Protection Team or otherwise known as the PPT (https://www.investopedia.com/terms/p/plunge-protection-team.asp) gave economic advice to the president during turbulent markets. Is it real? I guess in some fashion or another it is but is it actually a ‘working group’? I don’t think so.
Let’s face it, the S&P futures have rallied 1,224 handles or points from its 2174 low. The big back and fill pattern I was talking about a few weeks ago has only gotten bigger with the most recent sell off and rally. I don’t think the ES is going straight back up to the highs but its only 460 points away from it’s all time high.
Our view, the PitBull’s rule is that the ES tends to go higher early in the day and early in the week and that’s how I think this week’s S&P price action is going to end up. Our lean is to sell a 20 to 30 handle gap up and look to buy the midmorning low. There are a ton of buy stops above 2972 up to 2994 and that’s where I think the ES is headed. Then I plan to avoid the middle of the day chop and look for a 2:30 low and a late day pop. Remember, we are not here to fight city hall, the trend is your best friend!
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.
Market Vitals Technical Analysis
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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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