(ESU17:CME) chart by David @TradingFibz  

Tiz The Season…

The summer grind is in full swing, despite the ‘warning lights’ flashing in the VIX. The markets tend to slow down the week before the 4th of July, and the week after. It’s a time when a lot families / traders take time off, if they haven’t already, but that doesn’t mean it’s going to be smooth sailing.

Month End Robots Hit Sell Button

Yesterday, trade started with a slightly lower open, a push down to the 2429.25 level, and then a grind up to 2436.75. The dollar was weak and crude oil futures traded up to 44.39. Historically, oil tends to rally going into the 4th of July holiday, and with an estimated 44 million Americans set to drive 50 miles or more, it’s fairly likely the oil rally will continue. The ES went on to make a high by 1 tick at 2437.00 (always a bad sign), and the NQ made a high at 5852, and then both markets went into a downside tail spin, with the NQ leading the way.

At 1:13 CT the ES had traded all the way down to 2420.25, down 15.5 handles, and the NQ made a low at 5685.00, down a whopping 100 points. CLQ made a high at 44.44, and then sold off down to the vwap at 44.00. After the ES and NQ made their lows, the NQ popped up to 5713.25, and the ES traded 2427.50.

There has been a very high level of algorithmic and high frequency trading. After the short covering rally, the MiM started to show big numbers for sale. At 2:07 the MiM was showing $772 million to sell, and both the ES and NQ sold off down to new lows. As the end of the month nears there seems to be a high level of liquation going on in the stock market.

Whenever you have this type of selling, it tends to put a cap on the futures index markets, and the algos read right into it. At 2:45 the cash imbalance showed sell $1.1 billion and not long after the ES traded down to 2417.50, down 18 handles, and the NQ traded down to new lows at 5670.00.

(NQU17:CME) chart by David @TradingFibz

Dark Clouds

The Dow Jones and the S&P 500 futures saw their biggest daily declines in more than a month yesterday. Seasonally the markets are selling off at the right time, and with the VIX so low, the pickup in volatility fits right in. Total volume in the ESU was 1.6 million, and when you take out the 166,000 contracts traded on Globex, that leaves 1.4 million, then subtract 70% for algorithmic and hft trading, and your total volume is 400k contracts traded during the day session.

On the 3:15 futures close the S&P 500 futures (ESU17:CME) settled at 2420.75, down 15.25 handles, or -0.63%, the Dow Jones futures (YMU17:CBT) settled at 21291.00, down 77 points, or -0.36%, and the Nasdaq 100 futures (NQU17:CME) settled at 5677.50, down 100.75, points, or -1.74%.

While You Were Sleeping

Overnight equity markets in Asia and Europe both traded weak. Draghi’s hawkish comments on the degree of stimulus needed in the eurozone helped push the euro higher and pull stocks lower. In the U.S., the S&P 500 futures opened the globex session at 2417.00, and traded sideways in a 5 handle range until European stocks opened. The low at 2413.75 was made at 3:21am CT, and then the ES began trading higher. By 5:30am the futures had rallied to a new high at 2424.00, and then began to quiet down a little. As of 6:30am CT, the last print in the ESU is 2423.25, up 2.75 handles, with 186k contracts traded.

In Asia, 9 out of 11 markets closed lower (Shanghai -0.54%), and in Europe 10 out of 12 markets are trading lower this morning (FTSE -0.03%). Today’s economic calendar includes John C. Williams Speaking, MBA Mortgage Applications, International Trade in Goods, Pending Home Sales Index, EIA Petroleum Status Report, a 2-Yr FRN Note Auction, and a 7-Yr Note Auction.

Our View

It’s not looking so good going into the final trading days of the quarter. According to the Stock Trader’s Almanac, the last trading day of June (Friday) is bearish, with the Dow down 17 of the last 25. One thing that is clear is that the Nasdaq has lost its momentum, and the close below its 50 day moving average isn’t a good sign. Is the Trump rally over? It sure looks that way. Based on the overall price action, we think we could see lower prices, but we also do not want to forget MrTopStep’s rule that the ES tends to go sideways to higher after a big down day.


Our view; 2418 is a big level, but if the NQ doesn’t hold together, 2412 and 2404 could be in play. Ideally we want to get a look at the price action before putting on any trades.

PitBull: clq osc  -5/-22  turns down on a close below 4194; esu osc  -5/6  turns up on a close above  243784; vix osc  -3/1  turns down on a close below  949

Market Vitals for Wednesday 06-28-2017

[gview file=”https://mrtopstep.com/wp-content/uploads/2017/06/Market-Vitals-17.06.28.pdf”]

As always, please use protective buy and sell stops when trading futures and options.

  • In Asia 9 out of 11 markets closed lower: Shanghai Comp -0.54%, Hang Seng -0.61%, Nikkei -0.47%
  • In Europe 10 out of 12 markets are trading lower: CAC -0.33%, DAX -0.51%, FTSE -0.03%
  • Fair Value: S&P -2.98, NASDAQ +3.86, Dow -59.42
  • Total Volume: 1.6mil ESU, and 400 SPU traded


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