S&P Snaps Win Streak; Fed on Tap
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Our View
Unlike my days on the trading floor in bonds, the S&P always provided a lot of big trades and volatility. I knew when I was called over to the CME that I was stepping into a different animal — and that animal has only grown bigger and bigger over the years.
While most of what we did involved taking orders and providing flow, not everyone receiving it was trading with the desk. What they wanted were the instant messages sent out when the markets were moving. Having that type of order flow was key to the desk and its customers.
We did enough business with banks and hedge funds that it was hard not to notice. The flow to us was just everyday buying and selling, but it wasn’t to the CME. A lot of it was extremely market-moving, so when the CME told us we had to shut down the Pivot instant message on the desk — which had 400-500 trading firms, prop desks, banks, and hedge funds — the people on the other end were not happy.
Why? Because they traded equity options and glommed onto the flow. One of those glommers was Pete Najarian. He wanted to stay on the desk blast, but he didn’t trade with the desk; all Pete wanted to know was the flow. Today it’s different. We all know there are buy and sell programs running simultaneously — and not just when they align with fair value.
There is a constant rattling of programs that, if you end up on the wrong side of, is like jumping in front of a steamroller. I guess what I’m trying to say is that the pit may be gone, but creating flow isn’t.
Our Lean
You have an overload of the Fed today, the July FOMC Minutes this afternoon, and Jackson Hole this week. I don’t think the bulls or the bears can claim victory over yesterday’s trade; they both got what they wanted — a pop and a drop as the S&P 500 snapped its 8-day win streak.
There is also an annual payroll (jobs) benchmark revision at 10:00 a.m. ET from the Bureau of Labor Statistics. The expectation is that US job growth was weaker than what the BLS had previously reported, but we’ll see how it shakes out later this morning.
Our Lean: The ES and NQ were overdue for a pullback. We think it will be another two-way street today, but I will be keeping an eye on the NQ, which has been acting tired. But what happens when the ES and NQ close weak? They usually bounce.
MrTopStep Levels:
MiM and Daily Recap
ES 5-minute
The ES traded up to 5641.25 on Globex and opened Tuesday’s regular session at 5555. After the open, the ES traded down to 5525.75 and then rallied 18.15 points up to 5643.75. After a few lower highs, the ES sold off to 5622.75 — 21 points off the high — then rallied back up to 5627.25 before selling off again to 5614.25 at 10:45. After this low, the ES rallied back up to 5624.50, then dropped to 5616.75 at 11:00.
The ES rallied back up to 5621.00, sold off to 5616.50, and then rallied again to 5621.50 at 11:21. It then sold off to a new low of 5613.00 at 11:49. The next move was a 16-point rally up to 5629.00, with a total of 30k ES contracts traded on the pop-up. After this rally, the ES sold off back down to 5607.75, rallied to 5632.25 at 2:25, and then sold off to 5619.50 at 3:44. It rallied again to 5622.00 at 3:48. The ES traded at 5623.50 as the 3:50 cash imbalance showed $2.6 billion to buy, then sold off to 5629.25 and traded at 5620.50 on the 4:00 cash close. After 4:00, the ES traded down to 5617.75 and settled at 5620.00, down 10 points or -0.18%. The NQ settled at 19,804.75, down 53 points or -0.27%. Gold futures rose 1.6% to $2,533.40 an ounce, with the 10-year yield settling at 3.818%.
In the end, the stats were clear that nine up-days in a row has not happened since 2004. In terms of the ES’s overall tone, it rallied early and pulled back. In terms of the ES’s overall trade, volume was low at 974k contracts traded.
Technical Edge
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NYSE Breadth: 30% Upside Volume
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Nasdaq Breadth: 47% Upside Volume
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Advance/Decline: 33% Advance
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VIX: ~16
Guest Post — Polaris Trading Group
Topic: PTG Daily Trade Strategy
Author: David D Dube’ (a.k.a. PTGDavid)
Prior Session was Cycle Day 3: Positive 3 Day Cycle as price fulfilled all upside targets but failed to extend the rally, pulled back and consolidated around the 5620 Line in the Sand (LIS) as outlined in prior DTS Briefing 8.20.24. Range was 36 handles on 973k contracts exchanged.
…Transition from Cycle Day 3 to Cycle Day 1
This leads us into Cycle Day 1: This session begins a new cycle with the primary objective to find a secure low from which to stage the next rally. Partial decline is in-place at the 5608 level. Should further weakness develop, lower levels to note are 5595- 5590 zone, followed by 5575 – 5565 key pivot support. Bulls would need to reclaim 5630 or higher in order to retest 5643 recent high.
Our discipline of maintaining positioning that is aligned with market forces continues to serve us well, so stay the course.
As such, scenarios to consider for today’s trading.
Bull Scenario: Price sustains a bid above 5610, initially targets 5625 – 5630 zone.
Bear Scenario: Price sustains an offer below 5610, initially targets 5595 – 5590 zone.
PVA High Edge = 5630 PVA Low Edge = 5615 Prior POC = 5620
Economic Calendar
For a more complete Economic Calendar see: https://mrtopstep.com/economic-calendar/
Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!
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