Market Review
We had a change in trader expectations last Friday when the employment number came in unexpectedly positive. The reaction sent the ESM20 rocketing towards its all-time high set back on Feb 20, 2020, before the COVID-19 pandemic sent US and global stocks tumbling over the next month. Turns out that many of the US stock market index component companies benefited from the pandemic while smaller, non-essential businesses are struggling to survive. Companies such as Wal-Mart, Target, Costco, Home Depot, Lowes, grocery stores, Apple, Microsoft, Nvidia, Cisco, and Zoom had great quarters. Meanwhile, non-essential retailers like Pier 1 Imports, Modell’s Sporting Goods, True Religion, J. Crew, Neiman Marcus, Stage Stores (Goody’s Bealls, Palais Royal, Peebles, and Gordmans), JCPenney, and Tuesday Morning were all forced to file bankruptcy. Several smaller movie theater chains have filed for bankruptcy protection and AMC is on the brink. Bottom line, the COVID-19 pandemic has benefitted many of the big businesses that make up the major stock market indexes, so despite the still high unemployment numbers, it’s not inconceivable the ESM20 will be following the Nasdaq to new all-time highs.
Whenever there is a change in trader expectations, the technical get thrown out the window as markets search for and adjust to new fair value. As of Monday’s close, the ES is still probing higher for its current fair value area.
So what happened relative to last week’s technical scenarios? The key 3071 to 3096 resistance area held the ESM20 until Wednesday when it broke higher. On Thursday, the former 3071 to 3096 was retested from above as support and the area held. Then the Friday employment numbers sent the ES flying across the large LVN (low volume node) area into the 3200s. The change in trader expectations has kept the ESM20 above the LVN area. So now after several weeks of no scenario changes, conditions are different:
1. If the ESM20 continues higher, expect volatility to continue to shrink. A break above the all-time 3355.25 high could lead to a run towards 3400.
2. If the ESM20 clears the 3180s below, expect the LVN area between 3100 and 3200 to be worked for days, if not a week or more.
3. It will most likely take a bearish change in trader expectations for the ES to move through the support near the 3080s.
As a side note: Thursday evening, June 11 is rollover when the ES September (ESU20) becomes the front month contract.
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
Economic Calendar
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In the Tradechat Room
MiM
All lights green for a strong close. A local low was put in at 15:10 while the MiM was showing a weeak buy at 326M with -51% symbols on the buy side. That 3214 turned into a 16+ handle move into the close boosted by an MOC reveal at 15:50 of 4B to buy.
This is the first trading day after the Add/Delete list for the Russell 3000 was published. It is Russell month as the Russell 3000 index is set. This list is the 3000 largest stocks in the US where the top 1000 become the Russell 1000 (large-cap) and the bottom 2000 become the Russell 2000 (small cap). It leads to a lot of trading through June as funds and ETFs that use any of the Russell indexes a component of their fund or mimic a Russell index have to match up to the new index.
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
Get the skinny when we get it: Join the MiM.
Chart of the Day
Top Stories on MTS Overnight:
- Hedge funds in Hong Kong are considering pulling out…
- Progress Against the Pandemic?
- Tanger Factory Outlet (SKT) Surges: Stock Moves 7.1% Higher
- Key Democrats spurn push to defund police amid Trump attacks
- Tuesday: Job Openings
- 1920s Stock Market Chart
- Scalping With Pivot Points
- Top Oil Trader Vitol Paid Staff Dividend of $820…
- End-Of-Q1 Historically Tepid [CHARTS]
Globex
| (ESH20:CME) GLOBEX Session | (ESH20:CME) Day Session |
| High 3219.00 | Opening Print: 3199.75 |
| Low: 3183.25 | High 3226.75 (closing candle) |
| Volume: 390,000 | Low: 3193.50 |
| ES Settlement: 3227.50 | |
| Total Volume: 1.52M |
E-Mini S&P is trading -0.7%, Nasdaq -0.4%, RTY -1.6%, Dow future -0.8%. ES is negative early below the 3206 area, and it will be interesting to see if buyers show up again during the day session below 1% off the highs and will there be a rotation out of recent sector leaders such as banks and energy…
S&P 500 ‘Altered States’
The volume is low, there are marches and riots across the US, cases of COVID19 are on the rise, 35 million pissed off unemployed people and the S&P 500 futures are making new highs. This is clearly a case of the stock market’s ‘altered ‘states’
The ES traded 3198.50 after the open and rallied up to 3209.25 at 8;45. After the push up the ES sold off down to a new daily low of 3193.50 at 9:37 and traded back up to a new daily high of 3211.00 at 10:19 am CT. After the 17.5 handle rally, the ES traded 3202.00 at 11:15 and then started to do a big back and fill pattern all the way up to 3219.00 at 1:30. After the high, the ES pulled back 5 handles down to 3214.00 at 2:12. At 2:30 the ES traded 3215.00, traded 3223.50 at the 2:50 cash imbalance, and went from $800 million to buy to $2 billion to buy to $4 billion to buy and the ES shot up to a new high of 3227.75 at 2:54, 34.25 handles off the low. On the 3:00 cash close the ES traded 3227.25 and settled at 3226.75 on the 3:15 futures close, up 41.5 handles or + 1.30% on the day. In terms of the day’s overall tone there was a big early day reallocation, buy Dow and Russell / sell Nasdaq but after the early sell-off the markets acted very firm. In terms of the day’s overall trade, total volume was on the light side. There was a total of 1.52 million ES’s traded with 390,000 coming from Globex making total day volume only 1.13M.
DATA/HEADLINES:
Transmission of the novel coronavirus by people who don’t develop symptoms is “very rare,” the WHO said.
TODAY’S HIGHLIGHTS:
10:00ET JOLTS Job Openings, Wholesale Inventories; 1:00ET 10 Year Auction / FOMC two day meeting begins / George Floyd, whose death has sparked a worldwide reckoning over racial injustice, will be laid to rest next to his mother in Houston today.
The buoyant mood fizzled overnight as investors worried that global equity markets have run too far, too fast. After a record-breaking rally due to central bank stimulus, there are growing concerns that prices have overshot the economic recovery. The World Bank warned the global economy will contract the most since World War II this year, reducing incomes and sending millions of people into poverty in emerging and developing nations. Asymptomatic transmission of the novel coronavirus is “very rare,” the World Health Organization advised, raising questions about the rationale of confining populations at home and bringing the global economy to a halt. The virus has now caused some 7 million reported cases of Covid-19, with more than 400,000 fatalities.
EQUITIES:
Futures contracts on all major U.S. indexes slid as the historic rally faded after the S&P 500 erased its losses for the year yesterday. The fastest stock market collapse on record has been followed by one of the fastest recoveries ever, powered by unprecedented amounts of stimulus injected into financial markets and the economy.
Our View
MiM $ 4 Billion To BUY
I thought I had something going on the downside yesterday but after that early low and grind higher I knew my call for the ‘next 50 to 60 handles’ being down doesn’t look so hot right now. I want to keep this short and simple; 1) we are still in a very bullish uptrend 2) thin to win was a big help yesterday 3) the ES tends to rally early in the week and early in the day and last but not least 4) the PitBulls Thursday/Friday low the weeks before the expiration. Let’s face it folks this bulls ship has sailed in stocks and crude oil.
I think yesterday’s early sell-off was a set up for the big MiM buy. You can’t tell me that the guys with the better seats didn’t know there were big buy orders. The buyers got to buy cheap inventory on the way down and had a firm grip with little to no pullbacks. Our lean, I plan on selling any 10 to 15 handle gap-up open and look for a midmorning low and bounce. I am not throwing in the towel on the drop I was looking for, I’m just not as confident as I was.
Equity movers in early trading, as of 7:34am ET:
Advancers
- IDEX +67.7% (+$0.42)
- AQMS +41.4% (+$0.37)
- SOLO +17.6% (+$0.29)
- IMH +14.9% (+$0.37)
- RNET +14.3% (+$0.41)
- WMC +11.7% (+$0.42); Calvert Details Votes for Western Asset Mortgage June 19 AGM
- NKLA +10.8% (+$7.88); Nikola Chairman Says Variety of Factors Boosted Share Price
- LOVE +10.4% (+$2.06); Lovesac First Quarter Loss Per Share 58c
- AHT +10.4% (+$0.18); Ashford Hospitality Above PT First Time in More Than Four Months
- IMUX +8.9% (+$1.23); Immunic Gets FDA Allowance for Phase 2 of Covid-19 Inhibitor
- M +8.6% (+$0.82); Macy’s Surges After Shoring Up Cash Ahead of Preliminary Report
- INWK +8.3% (+$0.15)
- LTM +8.2% (+$0.24)
- DGLY +8% (+$0.40)
- SRNE +7.8% (+$0.37)
- NNVC +6.9% (+$0.45)
- AMPH +6.3% (+$1.26); Amphastar Gets FDA Approval for Succinylcholine Chloride
- CTSO +5.4% (+$0.49)
- WSG +5.2% (+$0.14)
- MIST +5.1% (+$0.22)
Decliners
- CHK -52.4% (-$36.7); Chesapeake Energy Plans Bankruptcy, PG&E: N.A. Energy Wrap
- SLNO -50% (-$1.62); Soleno Loses Two-Thirds of Value on Late-Stage Study Failure
- CERC -17.4% (-$0.56); Cerecor to Offer Shares via Oppenheimer
- WLL -17% (-$0.59)
- XOG -16.9% (-$0.25)
- GNC -16.2% (-$0.24)
- CRC -15.9% (-$0.43)
- GPOR -14.3% (-$0.34); Gulfport Energy Climbs Above PT First Time in Almost Seven Weeks
- RIG -13.3% (-$0.50)
- HTZ -12.7% (-$0.70)
- FTSI -12.4% (-$1.64)
- VAL -11.9% (-$0.26)
- OAS -11.3% (-$0.23)
- NBR -10.9% (-$9.16)
- SMHI -10% (-$0.48)
- CIDM -10% (-$0.29)
- AMPY -9.9% (-$0.22)
- CPE -9.6% (-$0.24)
- SIG -9.3% (-$1.57); Signet 1Q Comparable Sales -38.9% Vs. -1.30% Y/y, Est. -37.9%
- CDEV -9.3% (-$0.20)
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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