Is the S&P getting ready to go down, or is it setting people up for another big rip higher, as the markets move into the the PitBulls Thursday / Friday low the week before the May options expiration. This is a trading rule we have been looking at for over the last 25 years and we would not be talking about it if if didn’t work. According the the stats we keep, the trade has worked 17 out of the last 20 occasions, and I am sure if we went back further it would show this is not something you want to fade.
Earlier this week I noted here on the Opening Print that while the indexes looked to have some strength early in the week that we would look for the weakness late in the week, and after rallying on Wednesdays session, the late week weakness is exactly what we got. Whether it be the concern over weak department store earnings having an effect on the retail sales number today, or not.
The S&P 500 futures travelled from the 2079.75 high on Tuesday down to close at 2060.00 on Wednesday, and then on Thursday’s globex session ramped higher up to 2072.75 late in the day. The sour earnings and larger than expected jobless claims sent the futures down into the open, and from there sell programs took over after the 8:30 cst cash open pushing the ESM down to 2048.50 early in the day, more than 30 handles from this week’s high.
However, the benchmark index roared back in the afternoon, trading back up to 2066.50. I came onto the message board in the IMPRO room and told the traders that another one of the PitBull’s rules was that markets tend to close like they open, and this is what we saw as the futures sold into the close back to 2057.00 before settling at 2060.00, up small on the day. The market-on-close imbalance was a modest $200 million to buy.
Overnight, the equity index markets worldwide again saw drawdown dragging the ESM16 lower to 2049.75, 10 handles from Thursday’s contract close, before paring half those loses on a trade back to 2055.00. The ESM is currently sitting at 2052.25, down 6.5 handles, just before 7:00 am CT. The globex volume is just over 207K ,which is weak, but no worse than we have seen earlier in the week.
Today’s regular session will be pre-empted by retail sales and PPI, and will likely set the tone for the day. There is nothing to stop the ESM16 from rallying today after what could have been the pre-opex low, and depending on the early price action, we may look for that into the open. However, the chart appears to show a price break down, and if the futures lose the opening range today and cant get back to it early, then the clearest direction will be to sell the rallies as statistically the end of the week is the hardest time to fade the trend during the regular session.
In Asia, 11 out of 11 markets closed lower (Shanghai -0.31%), and In Europe, 9 out of 12 markets are trading lower this morning (DAX +0.20%). Today’s economic calendar includes Retail Sales, PPI-FD, Business Inventories, Consumer Sentiment, Baker-Hughes Rig Count, and John Williams Speaks.
Our view: It’s all about patterns when trading the S&P (futures), and one pattern we have been watching for over the last 25 years is the PitBulls ‘Thursday / Friday low the week before the option’s expiration (see MrTopStep Trading Rules ( https://mrtopstep.com/trading-101/ ). Will it work today? We think it will, and part of why we think that is that the sellers are back. Our view is to sell the early rallies, buy weakness, and be on the lookout for a late Friday RIP. As always, please use protective buy and sell stops when your trading futures and options.
Sign up for the MTS Book Camp will end on Monday morning but it’s best to sign up NOW !!!!
The MrTopStep BootCamp is May 16-20. It’s a very impressive line up of traders that would be hard to find any place else. We have always considered our traders as part of a collective, sharing ideas, price levels and any pertinent news that may be moving the markets. This bootcamp is especially loaded with with top tier traders. If you have never joined the bootcamp I suggest you do. Not only will you see how they do it, you will be able to watch the live trading. There really is no other trading education service like this, and it’s unique to the retail trading business, but it’s not all retail. Many of the things we use and talk about are exactly the same stuff we worked with on the trading floor when we were talking to the big banks and hedge funds (too bad they didn’t listen). That said I have posted the weekly schedule for you to review and the link to the sign up.
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Danny Riley from ‘The Cave’ with today’s Closing Print
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 11 out of 11 markets closed lower: Shanghai Comp -0.31%, Hang Seng -0.99%, Nikkei -1.41%
- In Europe 9 out of 12 markets are trading lower: CAC -0.18%, DAX +0.19%, FTSE -0.35% at 6:30am CT
- Fair Value: S&P -4.10, NASDAQ -5.25, Dow -51.90
- Total Volume: 1.8mil ESM and 2.6k SPM traded
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