Distinguishing between what we see and what reality is can be very deceiving. While some may say they ‘make money everyday’, most of us understand that it’s not reality. Unless you think, and act, like an algo there is no way a trader can make ‘everyday’. The futures markets have been inundated with program trading, and when it comes to trading most of these contracts, it’s like playing a shell game on the corner. You see and think one thing and the results are the exact opposite.
Did the ESM16 make a low on Thursday and a higher low on Friday? That’s what the charts say, but that’s not really what I want to talk about. I want to talk about the late day sell off and the MiM flip that pushed the futures down only to rally 8 or 9 handles in the final minutes of the day’s trade. Did that set things up for higher prices next week? Will the S&P futures (ESM16:CME) go up the way the S&P cash study shows? I do not think they will go up everyday this week, but i do think there will be an upward bias. The ESM does not seem to want to let go of the current rally just yet, but I still think there will be a larger pullback as the worst six months for stocks start from May to October.
Go With Your Gut
I have always been a guy that follows gut instincts. I take historical patterns and seasonalities to help provide a feel for the markets, and use my charts as a road map. It is not a perfect science, but I believe that after years of looking at the markets, I have developed some type of pattern recognition. On the CME floor, at my desk in the S&P, I relied on the noise of the pit, order flow and the quote boards. With all that gone I now rely on my charts for the overall price action. For instance, the S&P sold off going into the close before going back up. Keeping in mind the PitBulls Thursday / Friday low, and the MrTopStep Imbalance Meter (MiM) showing a sell imbalance, I figured if there was a MiM flip the futures would rally, and that is exactly what happened. With the ESM16 rallying in the final minutes of the day’s trade I figured there would be further momentum during Sunday night’s push higher, and the futures traded all the way up to 2052.00, nearly 20 handles higher than the 2032.50 low that was set late in the day.
Over the weekend a fellow trader sent me an article titled ‘The Hidden Power In Trusting Your Gut Instincts.’ Over the years of getting to know me I have time and time again explained that I did not get to go to college, that I do not have a PHD (popps has dough), and that I am not a Wall Street analyst, but a guy the has been part of every major stock market event since 1985. While I was on the trading floor I learned that even someone you considered close had no problem taking a piece of business, or a trading idea I had and profiting from it, and then turn around and say it was his idea, his trade. I knew as the floor dwindled that I needed to take those gut instincts I had learned from the floor and put it to work off floor. For the most part I have, and while I admit it’s not a perfect science, the use of instinct and gut feels do have their place in the markets. Patterns that we can recognize don’t last very long, that is why it’s so important to be able to adapt fast… shuffle your feet. Below is the link to the story. I suggest you read the story a few time and find the parts that best fit you. Sometimes its not a price that makes you want to buy or sell, it’s a feeling, and for me that is 90% of what I do. I hope you enjoy today’s Opening Print.
‘The Hidden Power In Trusting Your Gut Instincts’
Trusting your gut is age-old advice for a reason: Your instincts are usually right. Take these steps to stop second-guessing yourself.
In Asia, 6 out of 11 markets closed lower (Shanghai Comp +1.64%), and In Europe, 10 out of 12 markets are trading higher this morning higher (DAX +1.10%). This week’s economic calendar features 22 reports, 10 Treasury events and 7 Fed speakers. Today’s economic calendar is extremely light including a 4-Week Bill Announcement, 3-Month Bill Auction, 6-Month Bill Auction and the Fed’s Rob Kaplan Speaking.
Alcoa Kicks Off The Earnings Season
Our View: The ESM closed firm and traded higher just after Globex opened. Recently the ESM tends to rally at night and then sell off before and after the 8:30 CT open. It’s not just me seeing the pattern, others are seeing it too. We have a light economic calendar but a high level of fed speak this week. The main driver should be the April options expiration.
‘MrTopStep Update with Danny Riley’
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 7 out of 11 markets closed lower : Shanghai Comp +1.64%, Hang Seng +0.35%, Nikkei -0.44%
- In Europe 10 out of 12 markets are trading higher : CAC +0.57%, DAX +1.10%, FTSE +0.01% at 6:15am CT
- Fair Value: S&P -6.95, NASDAQ -8.05, Dow -89.19
- Total Volume: 1.76mil ESM and 4.3k SPM traded
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