Our trading motto should be ‘We shall sell no S&P 500 futures before their time’. After falling for over 3 weeks the ES tumbled lower off of what the public perceived as being bad news, Trump pulling his Obamacare remake.

As we all know in the high flying world of record low interest rates, stock buybacks, and algorithmic trading, once the selling dries up in comes an even larger buy program. That reminds me of something a very smart man once told me, ‘It doesn’t matter to the mutual funds, they buy when the markets are going up and they buy when the markets are going down,’ and that’s how I think the system works. Once the shorts start to cover and the ES starts hitting buy stops, the programs kick in.

Whatever the components that help drive the S&P higher, it’s an index arbitrage buy program, or a high frequency or algorithmic program that all flip on a dime. They go from helping press the ES lower to pushing it higher.

In all honesty I think there are a lot more electronic trading programs than just the three mentioned above. While they say Trump has been good for the day traders and bad for the algos, at the end of the day it’s all about volume. If the ES is down 30 handles during the day session and there is 2.5 million futures traded, that’s different, but when it’s 1:15 CT and there is only 900,000 eminis traded (like right now) and 125,000 of that volume came from Globex, that leaves only 675,000 traded in the day session.

I am only going to do a brief overview of yesterday’s trade… The ES sold off and rallied for most of the day. It’s been a long week and it’s not over for me. As many of you know I started as a runner on the CBOT. I often wonder where I would have wound up had it not been for the trading floor. I worked my ass off fighting for customers fills. When I say that ‘these are not our fathers markets,’ I mean it. Many years ago the PitBull told me that ‘all the tools I use that used to make me money don’t work anymore.’

The Bull didn’t have to tell me that. I knew that because as more program trading hit, the future’s got harder to trade. What would normally be a 3 or 4 handle move turned into a 8 or 9 handle move. I not only saw the evolution of the pits / markets, I lived there. I think the way this works is there is always going to be the next stock market event that sucks in trades and volume and pushes to event driven highs and lows and then the market returns to complacency.

Yesterday, the regular session opened at 2356.00 and the low came in at 2354.00. The market began to rally pushing a little bit beyond the 10 handle rule to 2366.75 before trading back to to 2359.00 midday and then rallying up to 2366.50 in the afternoon. A lower high was made, and the futures chopped around going into the close, settling at 2364.75.

Yesterday was an occasion where trading both sides of the market paid, I bought early (but sold to cover too early).

Dboy:(9:38:01 AM):paid 55.00

Dboy:(10:06:00 AM):sold 61.50s

Then I shorted at the 10 handle rule, and had to take a little heat, but patience ended up paying:

Dboy:(10:47:43 AM):sold 2365s

Dboy:(12:46:12 PM):filled on 2360.00 +5 handles

Overall the day saw a 12.75 handle range, and I participated in 11.50 handles of market movement. That my friends is a good day.

While You Were Sleeping

Overnight, stock markets in Asia were mostly weaker, followed up by Europe where all markets are currently in the red. The S&P 500 futures opened globex at 2365.50, made a tick higher print, and then showed weakness the rest of the overnight session. The futures pushed down to a low of 2356.75 early after the Euro open. As of 6:00 am cst the last print is 2358.50, down 6 handles.

In Asia, 8 out of 11 markets closed lower (Nikkei -0.81%), and in Europe 11 out of 11 markets are trading lower this morning (FTSE -0.55%). Today’s economic calendar includes a 2-Yr FRN Note Settlement, a 2-Yr Note Settlement, a 5-Yr Note Settlement, a 7-Yr Note Settlement, a 10-Yr TIPS Settlement, Personal Income and Outlays, Chicago PMI, Consumer Sentiment, Neel Kashkari Speaks, James Bullard Speaks, and the Baker-Hughes Rig Count.

Our View

If you have not noticed, the ES has been selling off overnight on globex. It makes an early low after the 8:30 ct futures open and then goes ripping higher. It’s been a pretty rock solid pattern for the last several weeks, even when the ES was going down. Despite the uneasiness, I think all the Trump ‘stuff’ has been good for the small traders / retail guys. The key is to be as patient as possible and don’t chase.

This morning we have a fairly light economic calendar and some Fed speak. I think most people / traders are looking forward to the weekend… I know I am.

Our view is that we think there will be big two way flow. Lots of volume in the first and last hour, and a bunch of chop in between. If volume drops after the first hour, like I think it will, the es will drift higher. Sometime over the NY lunch hour there should be a pull back, and later in the day there could be some big buy and sell imbalances, and that’s all I have to say about that!

MrTop Step Webinar : Trump 2017: Where do we go from here?

Please do not forget to sign up for this Saturday’s MrTopStep / Danny Riley solo webinar. There is a lot going on, interest rates, economy, Trump, budget. It’s been an algorithmic playground. I have compiled some cool charts to look at and some solid talking points. I also have a big surprise for those that show up for the webinar!

SIGN UP HERE

PitBull: clk osc 14/-22 turns down on a close below 4773 esm osc 7/-7 turns down on a close below 233812 vix osc -10/2 turns up on a close above 1190.

Market Vitals for Friday 03-31-2017

[gview file=”https://mrtopstep.com/wp-content/uploads/2017/03/Market-Vitals-17.03.31.pdf”]

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 +0,38%, Hang Seng -0.78%, Nikkei -0.81%
• In Europe 11 out of 11 markets are trading lower: CAC -0.30%, DAX -0.07%, FTSE -0.55% at 6:00am ET
• Fair Value: S&P -3.87, NASDAQ +0.99, Dow -63,70
• Total Volume: 1.16 mil ESM and 1.7k SPM traded