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Market Review
Polaris Trading Group: Taylor 3 Day Cycle Commentary Author: David D Dube (PTGDavid)
Tuesday’s Session was Cycle Day 3 (CD3): As this day is the official “end of cycle”, the expected action of the “BIG BOYZ” is to complete their selling of long contracts to the “Johnnie-come-late” buyers and to establish new short positions, in anticipation on the next cycle decline. End of Month/Quarter coincided with a “textbook” CD3 as outlined above, with price selling off into the close.
…Transition from Cycle Day 3 to Cycle Day 1
This leads us into Cycle Day 1 (CD1): The objective for this cycle day is to “probe for a new secure low” from which to begin the next cycle’s rally. It is also highly probable that “Smart Money” had previously established short positions on CD3 after exiting their long positions at the end of the previous cycle.
Forcing a “violation” of previous day’s (CD3) Low would accelerate selling momentum carried over from the previous session which increases smart-money short position profitability as price probes lower to projected CD1 Average Range Target. Once reached, open short positions would be expected to cover from those selling out longs (at a loss) are “flushed-out”, creating an “excess” or “extreme” cycle low from which “Smart Money” begins to establish new long positions.
Average Decline for CD1 (102.30) as measured from CD3 High (2635.75) projects “Possible LOW” 2533.45.
Link to access full Cycle Spreadsheet >> Cycle Day 1
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Thanks for reading,
PTGDavid
Economic Calendar
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Closing Prices
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In the Tradechat Room
MiM
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Our 3:50 pm reveal showed about 1B to the buy-side but there were big buy imbalances and sell imbalances as the last day of the quarter trading of musical chairs took place. The number was enough to drive up the 3:50 reveal candle from the 2564 area into the 2580 area, a nice 16 point gain. We stayed in the range sliding into the close.
Get the skinny when we get it. Join the MiM.
Chart of the Day
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Globex
(ESH20:CME) GLOBEX Session | (ESH20:CME) Day Session |
High 2635.75 | Opening Print: 2602.50 |
Low: 2572.50 | High 2629.50 |
Volume: 380,000 | Low: 2558.50 |
ES Settlement: 2600.25 | |
Total Volume: 1.75 M |
S&P 500 Futures: Failed End Of The First Quarter MarkUp
The ES traded up to 2635.75 Monday night and sold off down to 2572.50 early Tuesday morning. On the 8:30 CT futures open the ES traded 2602.50, upticked, then sold off down to the 2581 area. After the sell-off, the ES rallied back up to the 2603.50 level and then dumped down to the 2581 level at 8:52 am. The ES then rallied 44 handles up to the 2625 area and then pulled back down to the 2512 area and rallied up to a new high at 2629.50. After doing some back and fill between the 2608 to 2624 level the ES got hit by a sell program down to new daily lows at 2775.25. The ES then rallied back to the 2600.00 level and pulled back down to 2583.75. After the pullback, the ES rallied back up to the 2602 level at 1:39 CT.
At 2:00 the ES traded 2990.00 and at 2:15 traded down to 2558.50. At 2:30 it traded 2563.50 and traded up to 2569 at 2:50 as the initial cash imbalance showed $1 billion to buy. On the 3:00 cash close, the ES traded 2665.00 and settled at 2560.25 on the 3:15 futures close, down 52.75 handles or -2.02%% on the day.
In terms of the ES’s overall tone, it looked like there was a buy Nasdaq / sell S&P allocation trade going on and when tech stocks reversed the markets got real weak. In terms of the day’s overall trade, total volume was LOW with only 2.1 million futures traded. When you take out the 380,00 futures traded on Globex only 1.72 million contracts traded on the day session.
Our View
Airbnb Housing Rentals Crisis Could Cause Mortgage Defaults
It’s all fun and games when the markets go up so much and everyone starts scooping up homes. Some people live in them and some people rent them. By all rights, Airbnb could be a good barometer for a US housing market crash. Thousands of super hosts who bought 10, 20, 30 properties with mortgages that are heavily leveraged could be about to default. As part of the coronavirus stimulus action, the Fed bought $250 billion worth of mortgage-backed securities in a space of two weeks. For a perspective, that dwarfs the amount the fed bought during the housing crisis by $80 billion. Without travel, there is no rental income to pay the mortgages. My guess is in 2 to 3 months this could start to look similar to the 2008 housing crisis and could be one of the next stumbling blocks facing the upside in the stock market. This may not happen right away but I feel confident there will be mortgage defaults.
Our view, President Trump had a hard time verbalizing the coronavirus death rate during yesterday’s virus update and the ES acted accordingly, it sold off. The way I see the S&P right now is that it has had a good bounce and while I can not rule out a further pop I believe the decline is not over. The first quarter, ie the last trading day of March, ended with a big reversal and despite the historical stats that show new buying at the beginning of the new quarter I think the #ES ‘acts tired’. My overall view remains unchanged. I still think lower prices and I also think the current pandemic is going to really put the hurt on the US and global economies. Additionally, I do not think President Trump talking to Russia or Saudi Arabia is going to stop oil from falling to $16.00s or lower. Yes, there is a ton of supply floating around on oil tankers but there are no buyers because there is no demand. I understand that US banks are going to lose money when US fracking companies default on their loans but that’s a spit in the bucket compared to the travel industry, retail, or transportation sectors and the millions of jobs lost. Many economists say the comeback is likely to be far more halting. That growth could pick up strongly this summer but still fall well short of its former pace, with the recession’s after-effects lingering well into next year as consumers remain skittish about venturing out to restaurants and other gathering spots. Some of the damage could even be lasting, leaving a smaller economy than would have been the case without the pandemic. Let’s face it, my friends… we live in a new world trading order that is going to take many years to repair.
Market Vitals Technical Analysis
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