As the summer approaches, so do the ‘summer’ markets. This is generally tied to less trade, lower volumes, and thinner markets. It also means running the upside and downside stops. We understand that when the markets rally under these conditions, and the retail trader is not buying into it, then they are more than likely selling it. That means placing more stops above the market, which we all know the algorithmic programs feed off of. We also know that when the volume drops these programs can not pull off as much as they would when it’s busy or volumes are higher. This very well could be the case over the next few months; but we also know that things are going to get very volatile as the presidential elections approach.
Timing Is Everything
The summer trade is going to be about two things: patience and trade selection. Pushing trades in without a trade plan will not work. Being patient and waiting for the correct level to come into play will. Simple rules apply, like waiting for the European close to see if there is a reversal or continuation of the trend. One thing I have noticed is when the S&P gaps higher off the 8:30 open it’s best to watch to see if the buyers show up right away. When the markets are weak, I like to fade the gaps up or sell the first rally above the gap, but when it’s a trend day, I have learned to avoid that type of trading. Sometimes less is better, and as things thin out, trade selection will be key to making the proper choices. Timing really is everything. A trader can be right with the level, but wrong with the time of day he buys or sells. An example would be; you have a good feeling the S&P is going up, you buy the ES at 9:00, but get stopped out only to see the futures hold the level and rally after your stop has been elected. Or, you buy the ES after it sells off real hard, bottom fishing, and the ES rallies 3 or 4 handles in your favor; you sell half out only to get stopped out on the other half of the position after the ES sells off and retests the low and then rips higher. Timing is everything; and it’s only going to become even more critical once the summer warms up.
You Can’t Make The Money Without Doing the Work
I learned a lot from being on the trading floor and I have a good work ethic. At the time, I really didn’t understand what the PitBull was saying about ‘you can’t make the money unless you do the work’; but I understand that fully today. The markets are constantly evolving, and anyone that thinks he can trade the futures without doing the work, will not be as successful as those that do. It’s not like the ‘old days’ where a trader could walk into the S&P or bond pit and just take the other side of a paper order; scalping for ticks is just too dangerous. As I say on the MrTopStep videos, these are not our father markets. Being prepared means doing the work – knowing what is going on in the news, in economic reports and around the globe. It’s not like it used to be; and it’s never going to go back to being that way. The things that we used to use don’t work anymore, and the things that do work do not last very long.
After rallying from 11.25 handles down on the open yesterday back up to 2099.25 late in the day, the S&P 500 futures closed the final hour of trade off the highs, then saw weakness overnight down to 2091.25. A firm European market helped push the index back higher up to 2097.25, and it sits just ticks off that print now. Heading into today we have a fairly heavy schedule of economic releases as the ESM battles near the 2100 level. I don’t know how many more times it can fail at this level before breaking down or rising above. Going into tomorrow’s NFP there will likely be consolidation today with a range trade. We are looking at the 2103.75 globex high from this week and yesterday afternoon’s 2090.50 area as risk markers today.
In Asia, 6 out of 11 markets closed higher (Shanghai +0.40%), and In Europe, 10 out of 11 markets are trading higher this morning (DAX +0.06%). Today’s economic calendar includes the Weekly Bill Settlement, Jerome Powell Speaks, Chain Store Sales, Challenger Job-Cut Report, ADP Employment Report, Jobless Claims, Gallup Good Jobs Rate, Bloomberg Consumer Comfort Index, EIA Natural Gas Report, EIA Petroleum Status Report, 3-Month Bill Announcement, 6-Month Bill Announcement, 3-Yr Note Announcement, 10-Yr Note Announcement, 30-Yr Bond Announcement, Robert Kaplan Speaks, Fed Balance Sheet and Money Supply.
Our View: This week the guys in Chicago talked about cutting back the Opening Print. When I mentioned that on Periscope, many people said no way to that. I agree, but I also think it should be reduced in size. Yahoo says anything over 500 to 800 words is too much, but sometimes it takes more to get the point across. Going forward our goal is to write when there is something to be said, and when the markets are slow, we will say less. In other words, we don’t want a word quota to meet or be contained to. We won’t hold back when there is something to be said, but at the same time we won’t write lengthy just to meet the size of other OP’s. Our view is for higher prices, sell the rallies and buy weakness or just keep it simple stupid and buy weakness; 2130 is ON TAP.
As always, please use protective buy and sell stops when trading futures and options.
- In Asia 6 out of 11 markets closed higher: Shanghai Comp +0.40%, Hang Seng +0.47%, Nikkei -2.32%
- In Europe 10 out of 11 markets are trading higher: CAC +0.03%, DAX +0.06%, FTSE +0.38% at 6:30am CT
- Fair Value: S&P -1.52, NASDAQ -1.17, Dow -12.48
- Total Volume: 1.3mil ESM and 4.9k SPM traded
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