When it comes to trading the S&P 500 futures, no one promised us a rose garden. It’s a tough as nails game: when you get out too early they keep going your way, and when you don’t, they go back down and stop you out. To think that the algorithmic trading programs don’t have that nailed down is a fantasy. In these markets you have to get in, get out, and take the profits when you can. Trying to outsmart the robots doesn’t work, and doesn’t pay. You have to think like an algo.
The ESU opened at 2065.00 to 2065.50, 5.25 handles higher, rallied 2.5 more handles up to 2068.00, then reversed, selling off down to the 2053 area. The ESU15 then rallied all the way back up to the 2062.50 area, and reversed back down to make new lows at 2051.50. The futures sure have been easy to sell on the days that the S&P opens higher.
What happened? I said there would be sellers around on, and after, the open. My call was to sell the early rallies and buy weakness. I called out the sell imbalances off the early highs, but I have to admit, I don’t think the ESU15 was going to trade all the way down to the 2043 level.
Like I said; no one promised us a rose garden. Yesterday I made a trade that was a 3 handle winner right off the bat. I watched the other half of the trade become a 8 handle winner and, then went on to get stopped out at a 2 tic loss. I admit I make some stupid mistakes, but the cardinal rule is you never let a winning trade like that end up getting stopped out at a loss. Yea, I made money on the first part but I was already down a little money. I could have gone from a small loss on the day to a decent profit. Whenever that happens you must ring the register, take profits!!
Late in the day, the ESU15 traded all the way down to 2043.50 and made new lows. When it rallied a few handles I put this post out…
02:48:01 driley: gotta do the pre cash close pop
02:51:53 TRADINGDATA2: (driley) 4 buys 2.3k es bought
…and not long after the ESU15 rallied back to the 2051.00 level.
At the end of the day the sellers took advantage of the big gap up. With most of the buying used up before the open there was one small push up, then the algos and program sellers took over. Late in the day the ESU15 rallied like it does just before the imbalance is put out, and then sold off hard going into the 3:15 close, after the actual MOC came out sell $430mil. In the end, indices closed weak with the ESU15 printing all the way down to 2038.25.
I want to say something. I could be all wrong. The PitBull again reminded me about what his friend Terry Laundey used to tell him. That when the Dow Transportations (DJT) is weak like it’s been, that’s a signal of an economic slowdown. With Wall Street calling for weak Q2 earnings, all the ongoing economic turmoil in China and Greece, things could get a little tricky on the downside. I am not throwing in the towel, but I think it’s important not to overlook the current mood of the markets. Sure.. my gut feels can call some highs and lows, but at the end of the day it’s important not to forget that the S&P is still up 200% from its 2009 lows, so a 5% correction doesn’t scare me. Time and time again I have called for the bounce after a sell off, sometimes I nail the exact timing and sometimes I don’t. I also understand someday the ES won’t bounce, but I still do not think we have reached that point.
In Asia 8 out of 10 markets closed higher, and in Europe 12 out of 12 markets are trading higher this morning. Today’s economic calendar starts with Wholesale Trade, Boston Federal Reserve Bank President Eric Rosengren speech to Rocky Mountain Economic Summit, in Victor, Idaho and Federal Reserve Chair Janet Yellen speech, in Cleveland.
Our View: Those robots don’t mess around do they? With the pickup in volume you can clearly see the program and algorithmic trading programs exploit the S&P. It’s criminal what’s happened in these futures markets. Fewer and fewer traders, and at the same time, more and more servers and robots. A trader in the MrTopStep trading room asked if we had ever seen price action like we have been seeing… I said back in the credit crisis, but the PitBull said no… we have never seen this type of movement. Chop hard one way then chop hard the other. I can say one thing for sure…it’s very unsettling. That said there is not much of an economic calendar today but we do have Eric Rosengren and Janet Yellen from the Fed speaking. Volume was a little lower but I think that has more to do with people cutting back. We are still looking for the PitBull’s Thursday-Friday low, and keeping an eye on the S&P cash study that shows Monday as a big up. You can take it from there…
July Options Expiration Stats
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 of 10 markets quoted closed higher : Shanghai Comp. +4.54%, Hang Seng +2.08%, Nikkei -0.38%
- In Europe 12 out of 12 markets are trading higher : DAX +2.37%%, FTSE +1.31%, MICEX +0.36%, GD.AT +2.03% at 7:00 am CT
- Fair Value: S&P -7.24 , NASDAQ -8.50 , Dow -87.05
- Total Volume: 1.98mill ESU and 8k SPU traded
- Economic calendar: Wholesale Trade, Eric Rosengren and Janet Yellen speak. >
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