Market Review
Danny Riley – MrTopStep
S&P 500 Futures: Opening Head-Fake and Tech Stock Nightmare
The ES traded down to 3345.00 on Globex, total overnight volume was 460,000 contracts traded. On Friday’s regular session 8:30 CT futures open the ES traded 3357.25. After the open, the ES traded up to 3360.50 and then got ‘slammed’ down to 3336.25 in the first 20 minutes of the session. After the low, the ES rallied a few handles, back and filled and then the NQ started making new lows and pulled the ES down to 3322.00. After the low, the ES rallied 27 handles up to the 3349.00 area. After a pullback down to 3344.00, the ES rallied back up to 3350.00 and then dropped back down to the 3345.00 area after the CDC announced that it was going to hold a press conference on the coronavirus at 12:15 ET. After the CDC phone conference went live, the ES went down to the 3341.50 area and then dumped down to 3328. After the low, the ES rallied up to the 3336.50 area, pulled back down to 3329 and rallied back up to the 3337 area.
At 2:00 the ES traded 3335.00 as the early MiM showed $71 million and sold back off down to 3330.00 at 2:40 CT. At 2:30 the ES traded 3332.00 as the MiM showed $275 million to sell. On the 2:50 cash imbalance, the ES traded 3377.25 as the final MiM showed 1.25 billion to buy and the ES traded above 3340.00. On the 3:00 cash close, the ES traded 3337 and settled at 3340.00 on the 3:15 futures close, down 27.5 handles or 0.82% on the day. The NQ settled at 9458.75 down 159 points or -1.65%.
In terms of the ES’s overall tone, it was big bad and ugly but the NQs price action was horrific. In terms of the day’s overall trade, total volume was high with a total of 2 million ES traded with 460,000 coming from Globex making the total day volume 1.54 million contracts.
Economic Calendar
Closing Prices
In the Tradechat Room
MiM
MiM was moving back and force in the windless direction less mood waiting for some indication on the close. That indication came in the form of price action starting at 3:30 pm ET rather than the MiM itself. The reveal at 3:50 pm was 1.3B to buy confirming the 3:30 pm run. It was Opex and basically and untradable close in my opinion.
OPEX. Hate it. It distorts the markets has highly leveraged options plays are being unwound. You get A/D charts that look like this:
Where all the a/d lines are spread apart. Going into the close on Friday we had the S&P at 3:1 down while the broader Nasdaq Comp was just -2:1 down. The Naz 100 lead the downside at a whopping -6:1, three times mores stock down that then broader components. It was profit-taking. Today will be more distortion over the Manic Monday open.
BREAKING:
WATCH THE MIM on the open today. If funds sniff a bargain or have to get in, they will pile in on the open at the last minute (9:29:29 AM ET). If funds need to get out for balancing over weekend orders, they will get out on the open. A great day to watch the open.
It will be a slow open on the NYSE as specialist balance their books for the open.
Chart of the Day
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Globex
| (ESH20:CME) GLOBEX Session | (ESH20:CME) Day Session |
| High 3369.25 | Opening Print: 3357.25 |
| Low: 3345.00 | High 3360.50 |
| Volume: 460,000 | Low: 3328.00 |
| ES Settlement: 3340.00 | |
| Total Volume: 2M |
Our view: Taking on the Terminator – CME’s Data Center
If you think the markets have gotten out of control you are joining the ranks of thousands of other traders that think they have had their skill set taken away. Years of studying the markets, charts, moving average and indicators… everything we learned has gone up in smoke because the exchanges decided that the people that made up the trading floors and the customers no longer mattered. Maybe you think I am pissed but I’m not. The evolution of trading and its computerization was inevitable. I have always said in the eyes of the exchanges it’s all about volume. In the 1980s humans made up almost 100% of the volume, in the early 90s it was like 60% and today non-algorithmic / HFT trading makes up about 10% of the exchange’s volume. Do you think Charles Schwab decided to give zero commissions for free for nothing? No, they didn’t, they have their own property bots that make way more money off your trades than the commission you paid, it’s all a matter of dollars and cents. That, my traders, is the bottom line. We live in a new world trading order and its never, ever going back to the ‘old days’. We have to learn to live with the BOTs or leave. There is no in-between.
The Market’s Health
https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6
I think it’s ok to question the overall health of the stock market and the global economy. Eleven years into the bull market the Dow ‘supercycle’ looks like it’s on the ledge and the with the S&P up 480% from its 666 credit crisis lows and the coronavirus shutting down supply chains around the globe, I think it’s fair to question the overall condition of the S&P. On Friday, as the Nasdaq and S&P fell, so did the yield on the benchmark 10-year U.S. Treasury note which touched it’s lowest level since September, closing at 1.470% after earlier approaching the all-time low from 2016 of 1.366%. Yields on longer-dated Treasuries fell to record lows while gold prices surged to a seven-year high. Gold has closed up seven days in a row and is now up 8.2% on the year. The moves in the bond and gold market spell one thing…FEAR. That said, the S&P is ‘only’ 1.5% off its record high set last Wednesday. That said, only a handful of economists are calling a recession and the BULLs are not throwing in the towel. It’s been a dip buyers market for the last 10 years and with over $3 trillion dollars waiting to be out to work in the stock markets the spread of the coronavirus is clearly set to test the willingness of the buyers.
Headline risk will continue to haunt the ES. We all know the S&P hates uncertainty and currently, it’s at an extreme level. On Jan 2nd I said the S&P would see ES 2900.00 and I still believe it will. For years the bots have been trained to buy every dip but last Thursday a new algo hit the ES that is pumping out thousands of contracts. It’s the single largest bot in the future and it was selling every uptick last Thursday and Friday. A friend that was a Bache order filler in the S&Ps and started trading electronically when Globex was launched pointed it out to me early Thursday morning. He is an avid follower of the ladder and volume pointed it out to me early Thursday and at first, I thought he was full of it but when he shared his screen it was very clear to see. Our lean is that we can not rule out a bounce in the ES but if the ES starts taking out the 3313-3310 and breaks 3280 it will start to hit several clusters of sell stops that could push it straight down to the 3230 -3240 level. There is also an extremely high level of complacency on the Bulls’ part and if indeed the global economy is slowing this will not be good for the S&P. Ideally, we lean to selling the rallies but again, when people get too short at low prices it causes big short-covering rallies so while we are turning bearish we also can’t rule out the bounces.
Market Vitals Technical Analysis
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As always, please use protective buy and sell stops when trading futures and options.
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