Asia and Europe are seeing some big liquidation. Chinese iron ore prices, which is used to make steel rebar, fell sharply, and Japan’s Nikkei fell another 1.6%. The Euro Stoxx 600 was down -0.80%, led lower by shares of oil and gas companies, and the DAX was down the equivalent. In the U.S., the dollar fell against the Euro, and the S&P 500 futures opened down -0.48%.
Everything pointed to another bad day, and after opening at 2566.25, the ES went into a tailspin all the way down to 2555.50 in the first 10 minutes. You could see the increased algo activity ‘running’ the sell stops.
After making the low, the ES started moving back up as the NQ started to lift, initially trading back up to 2560.25, and then pulled back down to 2557.25 a few times. The ES basically went into a prolonged buy program after that, pushing the index futures back above the vwap to the 2563.50 area. It then pulled back a few handles before shooting up to 2567.50, and then up to 2571.50 just before 10:30 CT.
Recently it seems like the algos are trying to get even for all the low volume and narrow ranges from a few months ago. My friend Cyrus, a former head prop trader, asked “didn’t we say that in ’99 too?”
At the end of the day, it’s still just psychology. Algos just amplify the moves, a human programmed the algos, and now it feels like the evolution from knives, to guns, to AR-15s. Well I have to agree with Cyrus, it’s all big guns now.
The PitBull and I talk about how none of the old stuff we used to use to make money works anymore, and Art Cashin said on CNBC that “nothing seems to hold form in the old traders handbook.” The way I see it is, you have to put the trade on and walk away from the screens, or your trade idea will change because you are looking at every twist and turn.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 8 out of 11 markets closed higher: Shanghai Comp -0.08%, Hang Seng +0.58%, Nikkei +1.47%
- In Europe 12 out of 12 markets are trading higher: CAC +0.63%, DAX +0.45%, FTSE +0.14%
- Fair Value: S&P -0.87, NASDAQ +4.46, Dow -28.79
- Total Volume: 1.58mil ESZ & 774 SPZ traded in the pit
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