You can’t turn on the news without being bombarded with talk of the “shutdown” … but on the floor it’s merely equal parts disgust and amusement.
As I’ve been saying all week in the MrTopStep Trading Room, my approach to trade this week has been: the “shutdown” is merely grandstanding by the politicians. Therefore I’ve had to remind myself that the market “doesn’t play that game” and it will wait until the pols finish. So I’ve needed to
- be patient
- take a scalp-first mentality
- keep aware that opportunities should be few and far between.
I feel the bond market has more at risk from the looming debt ceiling issue and to a much lesser degree, next week’s auctions. So I’ve had to focus more on the S&Ps for insights, with bonds and notes taking a back seat.
As we wrap up the week, I’m favoring the bears in the S&Ps; I’m not sure I’ll sell rallies above the pivot (1672.25) but the bulls get nothing going on the upside until they take out 1693.50.
If we get the weakness I’m looking for, I will look first for a move to 1659.50, which is the real key to the market. If the bulls step in there and hold it, trade will just work back up into the recent range. However, if the bears maintain control, I’ll look for 1639.
Time out for EDUCATION!!!
In the E-mini S&P (ESZ13) chart, the vertical green line represents when I thought SPs would begin a push back up towards 1683. The dip around 1:20 was the news of the shooting outside the US Capitol. It was obvious as the dip was subsiding that the market had overreacted and subsequently it continued its sideways drift.
But on the cash close SPs broke back down to the overreaction lows. Why? One of two things:
- someone (read: institution/big player) was caught down there and muscled it back down to get out, or
- the market wanted to see what was down there.
Keep this phenomenon in mind – you will see it over and over again. Fat-finger errors, market reaction to rumors … knowing that these things do happen whether there’s a government shutdown in the headlines or not will help your trading a lot.