Traders should lower their expectations on holidays when the banks are closed. Yesterday was a perfect example of that.
Thin to Win
During the overnight globex session the ES traded in a narrow range and started moving higher around 4:00 am. That momentum carried the futures to a 11.50 handle higher open and a push to 2163.50 in the early goings. After several attempts at taking out the high the ES started to reverse. The bottom line… The banks are closed and a little bit of ‘thin to win’ took over in the beginning and later parts of the day.
At 12:30 CT the total trading range was only 5.75 handles. The days low was made after the open at 2157.25 and the early morning high came in at 2162.50. Total volume is a total joke. There were 695,000 contracts traded but 185,000 came from Globex before the 8:30 open. That leaves 510,000 contracts traded during the day session, and when you take out 65% (being nice) for algorithmic and program trading, the volume drops down to 200K. In a nutshell, no one was trading.
Bank Holiday Slowdown
After selling off down to 2157.00, the ES rallied up to 2161.00, then dropped back down to 2158.50. Earlier, in the MrTopStep forum, I spoke about how the banks and hedge funds were not trading. Another trader asked why the hedge funds would not be trading? The first part is that, in ‘general,’ the hedge funds are trading far less than they used to. They just can’t make money like they used to. The second part is that when the banks are closed you can’t move money. Everything slows down when the banks close, and that affects just about every financial institution.
Late in the day the ES sold off and double bottomed at the 2156.25 level when the MiM started showing $150 to $200 million for sale, and then up ticked slightly going into the 3:15 futures close. In the end, the (ESZ16:CME) was up 17 handles at the high of the day, and ended up settling up 12.75 handles, or +.60%.
With regard to the days overall trade, the Columbus day holiday consisted of low volume and quiet trade. In terms of the S&Ps overall tone, we think the higher lows and the back and fill price action are bullish. We also have to go back to that overall price action of up one or two days in a row, or up one day down the next day, may not change anytime soon. Like I told the PitBull, there is a lot of uncertainty out there.
While You Were Asleep
The overnight globex session, or Part No.1 as we call it, was quiet. Only 115k ESZ traded by 6:15 a.m. cst. Overnight Asian markets were mixed to higher, and Europe once again opened up with a bid higher. The S&P futures traded to a 2160.75 high early in globex before being offered during the Tokyo and European sessions. The ES found a low of 2151.75 about 90 minutes after Europe opened before rallying back up to 2156.
In Asia, 6 out of 10 open markets closed higher (Shanghai +0.56%), and in Europe 9 out of 11 markets are trading higher this morning (DAX +0.35%). Today’s economic calendar includes NFIB Small Business Optimism Index, Redbook, Labor Market Conditions Index, a 4-Week Bill Auction, a 3-Month Bill Auction, a 6-Month Bill Auction, and a 52-Week Bill Auction.
Our View
It looks like more of the same for the ESZ as price continues to consolidate between 2130 and 2170. There are 21 trading sessions in October, and today will get us through the first 7, or ⅓. There has yet to be any sign of panic, and after yesterday’s second lowest volume session of the year, it doesn’t feel like anyone is close to hitting the panic button yet. Yesterday a trader in the MrTopStep forum asked me if Mondays up day would affect Turnaround Tuesday. My answer was that when Mondays are up, Tuesdays tend to be weaker. Our view is for early day weakness. Sell the early rallies and buy the midday pullback.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 10 open markets closed higher: Shanghai Comp +0.56%, Hang Seng -1.27%, Nikkei +0.98
- In Europe 9 out of 11 markets are trading higher: CAC +0.33%, DAX +0.35%, FTSE +0.34% at 6:00am ET
- Fair Value: S&P -6.08, NASDAQ -6.31, Dow -87.30
- Total Volume: 950K ESZ and 2.0k SPZ traded
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