Sometimes it’s the PitBull who comes up with this stuff and sometimes it’s me. They are things we see and distinguish as patterns. While I know I can’t keep up with the PitBull’s smarts, he says he can’t keep up with my street smarts. Together we have made up all sorts of songs and trading rules. One of the songs is called “Take out the buy stops, take out the sell stops.” But the PitBull’s newest analogy for trading the S&P is called “water in the bathtub.”

If you have an algorithmic program it automatically picks up on patterns. One of the big ones is how the ESH15 almost always trades the overnight Globex trading range. It’s clear to see that these programs have been written to run our buy and sell stops. This doesn’t just happen in the S&P futures, it’s in every market: corn, wheat, beans, crude, WTI, Nasdaq futures, Dow futures, British pound, yen, Swiss franc, euro, Australian dollar, Russian ruble, Brazilian real, bonds, metals, and their options. You name it, there is an algo to trade it. In all these markets the algos push the futures up into the buy stops and down into the sell stops just like “moving water around in the bathtub.” Meaning they’re easy to push around, especially when it’s as thin as it has been for the last 3-plus weeks.

Like the PitBull, MrTopStep started writing down patterns and rules he has seen and developed, but like the sands of time, some just don’t work as well as they used to. Like Mutual Fund Monday, which used to be a favored buy day for the mutual funds, the PitBull’s Thursday/Friday low the week before the expiration has fizzled out lately. That said, we never forget the rules entirely.

One of the PitBull’s tools that has worked for years and has not been working so well lately is the QCHA, a NYSE indicator that shows buying and selling going on below the surface. Again, I want to point out that while they may not work as well as they used to, we still maintain them in our trading toolbox every day.
Traders need tools to keep up with today’s high-flying futures markets more than ever, but they also must fit the trader’s personality. Finding things that work continues to be difficult, but at MrTopStep.com we believe that traders must have some set of rules to trade by. That’s why we give away this free ebook: The Trading Rules. https://mrtopstep.com/mts-trading-rules/

In Asia overnight, 8 of 11 markets closed lower, and Europe 9 of 12 markets are trading lower this morning. Today’s economic calendar: MBA purchase applications, ADP employment report, Gallup US job creation index, PMI services index, Charles Evans speaks, ISM non-mfg index, EIA petroleum status report, Esther George speaks, Richard Fisher speaks, Beige Book.

Our view: It’s 6:30 CT and the ESH15 is trading 2103.25. Is the most recent selloff over? I get the feeling it may not be over. We may keep the S&P a little weak during the middle of the week and then let Friday’s jobs number do the heavy lifting. Either way, I don’t think there is a lot of downside left, maybe a push down to 2090-2085, but even that may be hard to do. The ESH15 tried twice since last Friday to break 2100, but it has held. Despite the selloff the ESH15 only did 1.23 million contracts yesterday. That’s not good for a day when the S&P sells off 16 handles from its high to low.

“S&P 500 Futures and the PitBulls Water in the Bathtub”

800 people came to our webinar last weekend. (MrTopStep “Unplugged”) It’s obvious a lot of you are eager to improve your trading skills or get in or get back into the game. Our week-long bootcamp is the perfect place to trade alongside professional traders, watch us work, and ask all the questions you want.

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

• In Asia 8 out of 11 markets closed lower: Shanghai Comp +0.51%, Hang Seng -0.96% Nikkei -0.59%
• At 5:30 am CT in Europe 9 of 12 markets are trading lower: DAX -0.35%, FTSE -0.34%, MICEX -0.81%, Athens GD.AT -1.22%
• Fair value: S&P -1.54, Nasdaq -0.58 , Dow -16.54
• Total volume: BETTER 1.36mil ESH and 7.9k SPH traded
• Economic schedule: MBA purchase applications, ADP employment report, Gallup US job creation index, PMI services index, Charles Evans speaks, ISM non-mfg index, EIA petroleum status report, Esther George speaks, Richard Fisher speaks, Beige Book

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