Today MrTopStep is doing the first of three planned webinars for the new MrTopStep Closing Imbalance Meter. While some of you are already familiar with the product, this will be an opportunity for all of us to share what we have learned about the MIM.
It’s important to know that MrTopStep is not a broker. We are not using your contact info for anything other than staying in touch with you. Unlike many of our competitors, we don’t lease, loan or sell our list, ever.
If you have been a past customer of our trading room we want to invite you back. While many of you may have taken a break from trading over the summer because of the low volatility, we think things will heat up in the fall. If the knife does start to drop, MrTopStep will be part of the big move.
The MIM: A new edge in uncertain markets
[pullquote]That’s not how we work at MrTopStep: education, not sales gimmicks.[/pullquote]One of the things MrTopStep prides itself on is telling the truth. If we have a bad trade or idea we tell you. We don’t gloss over losing trades, because handling losses is part of successful trading.
Nor do we hold on to losers for 20 handles, then make money after a 50-handle selloff, and pretend that was our strategy all along. That’s not how we work at MrTopStep: education, not sales gimmicks. That is why I want to tell you what we know so far about the MIM, a powerful tool but not a 100% foolproof holy grail.
- We have not fully figured out all the nuances of how best to trade with it in every circumstance.
- The MIM works best on heavy volume days, such as end of quarter rebalances, quadruple witching, and when volatility is moving. Our biggest successes with the MIM so far have been on those days.
- There are times when it works and times it seems dead in the water. On such days the best way to use the MIM is to ignore it.
- News algorithms are the first to exploit the ES when the volumes are so low.
- Just because an imbalance is $300 million to $400 million to buy doesn’t mean the S&P will just go up. Remember, the broader market is not the S&P. Big funds don’t sell out their stock positions over a bad headline, they use the S&P (sell it) to hedge a position.
- Sometimes we have seen that big up move happen and end quickly, with the market then resuming its downtrend.
- When the MIM is 80% to 90% the indices generally go in the favored direction. This is especially true when the MIM holds above 90%.
[pullquote]..they wanted a set-it-and-forget it system, which is not what the MIM is. It’s sort of like returning a microwave and complaining, “This is the worst TV I’ve ever bought.”[/pullquote]These are our initial observations after a couple of months of testing. With a tool as new and powerful as the MIM, there may be insights we haven’t realized yet. So far only a couple of early customers have canceled; most people rave about the results they’re getting.
Those who end their subscription have all given the same reason. They say that they did what the MIM “told them” to do but the move happened too quickly or they stayed in hoping for more profits and lost their initial gains. In other words, they wanted a set-it-and-forget it system, which is not what the MIM is. It’s sort of like returning a microwave and complaining, “This is the worst TV I’ve ever bought.”
If you want to learn what the MIM really is and what it can reveal, join us for today’s webinar at 2PM ET/1PM ET. I’ll be welcoming Jill Malandrino of TheStreet.com and our MIM developers. You won’t want to miss this.
September is full of news, including Syria
The Asian markets closed mostly lower and Europe is down across the board. There is a news tsunami coming and you can add Syria to the list. Today’s economic calendar picks up with four numbers, some Fed speak and a 2-year note auction. Yesterday we were right — we said sell the rally, and after making its high at 1667.30 the ESU drifted lower, got hit by some sell index arbitrage sell programs and then got whacked by the John Kerry news conference on Syria. The markets did not like what he had to say and as easily as the spoos went up, they went back down.
I know I have been speaking about September news a lot, but we have more to add to the list. Yesterday the U.S. government decided to take military action against Syria, which pushed crude oil up to $107 a barrel. While we still have a lot of economic reports to get past this week, next week’s economic calendar is packed, with 28 economic releases; 12 T-bill, T-note and bond auctions or announcements; three Fed governors speaking; and the jobs number on Friday.
On Sept. 9 both the House and the Senate convene with 9 days until the end of the fiscal year and the current spending authority. Treasury secretary Jack Lew warned yesterday that the U.S. will run out of borrowing authority in mid-October, raising the prospect of financial chaos if Congress does not act to raise the so-called “debt limit.” And then we go into the September quadruple witching during the week of the 16th. A forward-looking view may be hard to keep over the next few months.
Our view is that the S&P almost always has some type of two-way trade. Selling a gap-down opening is a very tough trade, but as we have often seen, that doesn’t mean you can’t. Many times on a gap up or down the day’s high or low is made right on the open.
It’s tricky. That said, we are sticking with selling rallies. Maybe you can buy the open for a pop, but we think the markets are heading into troubled waters. 1620-1625 is the next big support area.
As always, keep an eye on the 10-handle rule and please use stops when trading futures.
- In Asia, 9 of 11 markets closed lower (Shanghai Comp. +0.34%, Hang Seng -0.59%, Nikkei -0.69%).
- In Europe, 12 out of 12 markets are trading lower (DAX -1.44%, FTSE -0.64%)
- Morning headline: US Targets Syria
- Total volume: 1.21mil ESU and 5.8k SPU (mostly ETFs) traded
- Economic calendar: Fed’s Williams speaks, S&P Case-Shiller home price index, consumer confidence, Richmond Fed manufacturing index, 2-yr note auction