Market Review
Continuing with last Tuesday’s Opening Print discussion, let’s look at how the ESM20 played out against the scenarios introduced. Monday, April 6 was a strong trend up day, closing near its high. Above was a low volume area, one that could allow the ESM20 to move quickly through to the next significant structural resistance area. I wrote, “if the ESM20 can get into the 2700s, it’s probably going to the 2800s and will work the area between for a few days, possibly more than a week”. This is the scenario that played out and price remains in a position to continue working between support around the 2650s and resistance under the 2850s where price is now comfortable.
The ESM20 has now bounced over 54% from the 2174 Mar 23 low into an area where it may be difficult to keep the upward momentum. Resistance under 2850 is proving to be significant and the 200-day moving average (MA) is closing in on the structural resistance area. If the 200-day MA can be cleared, that would be very significant and a reason for bulls to re-up their buying programs. I could be wrong, but I think there is still too much uncertainty surrounding the coronavirus and how it will affect the US economy and corporate earnings. The current bounce is based on hopes that coronavirus conditions are improving. We’ve still not reached a slowing and apex in US cases, but perhaps we’ll see some slowing this or next week. In the meantime, don’t be surprised if the bears crack the 2650 support area and take a shot at testing the 2424.75 swing low.
Below is a snap of last week’s chart compared with this Monday’s daily ESM20 chart. Thanks again for reading. For more information on how DTG can help your trading, visit us at DiscoveryTradingGroup.com
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MiM
MOC was a 1B sell, almost a 20 point swing on the 3:50 pm ET candle. Market was pretty resilient as it floated back toward the high for the close.
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Globex
| (ESH20:CME) GLOBEX Session | (ESH20:CME) Day Session |
| High 2819.75 | Opening Print: 2768.75 |
| Low: 2717.25 | High 2771.75 |
| Volume: 270,000 | Low: 2711.00 |
| ES Settlement: 2759.75 Down 20 Handles or -0.72% | |
| Total Volume: 1.53M |
S&P 500 Futures: S&P Down 0.72% / Amazon Up $142.45
For most of the day, the rally in AMZN was the Nasdaq’s ‘saving grace’. Early on the (NQM20:CME) got hit by several tech sell programs but seemed to shake off the weakness as AMZN ground higher. If not for AMZN and TSLA the S&P could have slipped more.
The ES rallied up to 2819.75 on Globex and traded 2768.75 on Monday morning’s 8:30 CT futures open. After the open, the ES rallied up to 2771.75 and made a low of 2711.00 at 10:05 CT. After the low, the ES traded back up to 2748 at 11:15, made a low of 2721 and the futures rallied up to 2745 at 1:05. The ES then sold off down to 2726.75 and then traded flatline.
At 2:00 CT the ES traded 2739.00, traded 2745.50 at 2:30 and traded 2760.75 as the 2:50 (cash imbalance) MiM showed $800 million to sell. On the 3:00 cash close, the #ES traded 2753.00 and settled at 2759.75, down 20 handles or -0.72% on the day.
In terms of the day’s overall tone, the ES was weak but not overly. In terms of the day’s overall trade, total volume was VERY LOW at 1.53 million contracts traded minus 270,000 from Globex making total day volume 1.26 million contracts traded on the day session.
Our View
Economic Reopening; A Daunting Task
I know we have to get the economy rolling again. The longer the US waits the bigger the economic problem. But starting up the economy and having to shut it down again would be an even larger problem, from auto companies to the airlines there is a big bet going on and personally, I do not like the odds. I know there are a lot of people that are actually following the rules, self-quarantining, social distancing and only going out to go to the doctor and grocery store. It’s been a rough time and it has worn people out. The stress of losing a job or the prospects of losing it is a mental drain. Sometimes I get so caught up in trading I forget about COVID19 but when I am flat I start thinking about it right away. I find it very hard not to stay on top of it because things are changing so fast. One thing that is changing is the ‘food’ supply chain because workers at some of the beef and chicken meat packing companies reported hundreds of workers were infected with the virus. I know… I think too much but I followed it up by going to Costco yesterday. If you wanted a TV or some bad shorts they had it but when I walked over to the meat section there was one full aisle that was completely empty. There were zero chickens to be had. Yes, they had a few pre-cooked chickens but when I walked past the long aisle floor refrigerator everything chicken was gone. And you still can not get things like hand sanitizer or Clorox wipes.
I have a friend that lives in London and he told me there is a big food shortage. I do not want to be an alarmist but has the virus broken America’s food supply? Well my answer was I saw some of it today. Funny thing is I gave my friend in London a hard time because he’s always talking about going to the ‘pub’ and has such a nonchalant attitude. I really didn’t give him a hard time about not stocking up but he now understands the seriousness of the coronavirus. I think a lot of people are now admitting that the ‘it’s just the flu’ mentality that was the worst call in a lifetime. I always try to put my best foot forward. Does it always work? Well, I would say most of the time. That said, it’s a rough, cruel world out there and there is nothing in me that says ‘things’ are ready to reopen. The cases may be levelling off in NY but they are still exploding and starting to hit other cities and towns. Once you start to open the economy everyone will start going out. It will be the end of social distancing as we know it and a big leap in cases.
Our view, we have a few things colliding this week. The first is the earnings officially kick off this morning, its mid-month, and last but not least it’s the April options expiration week. Yesterday I got it right selling the rallies but if the ES is really going down it has to close below 2650.00. If it does that the ES will accelerate lower but if it doesn’t, ‘thin to win and Turn Around Tuesday’ could spell higher prices. I have had 2850 in the ES on my mind for the last two weeks. It’s 6:00 PM CT and the ES is trading 2768.50 with a 2771.00 high. If the ES holds I think we could see some type of upside stop run today. That doesn’t mean you can sell the rips but as they say, no stops go untouched in the S&P 500 futures! You can take it from there.
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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