Chart by @ChicagoStock

In the old days, traders in the CME Group’s S&P 500 pit and the NYSE would always cheer new contract highs, but after the credit crisis blew most people’s retirement accounts, fewer people are trading. The big banks and brokerage firms do not want to admit it, but the downturn has not bottomed.

Wall Street and LaSalle Street will never get back to where they were. Wall Street made up 10% of the hiring in NY and today it makes up just 1%. In Chicago, where the CME and the CBOT battled, there were over 500 clearing members; today that list of full clearing members is less than 30 and only a handful take accounts from retail traders.

Where Have All the Traders Gone?

Wall Street and LaSalle Street in Chicago were demonized during the credit crisis. As more firms went out of business and the word subprime started getting kicked around, the brokerage and bank trading business literally disappeared. As the Federal Reserve pushed its quantitative easing and bond buying programs, it lowered lending rates to zero. As millions of Americans lost their homes, the stock market went into a tailspin.

Retirees who had investments in brokerage stocks like Bear Stearns and Lehman saw their accounts drop in some cases as much as 70%. The clock was already ticking on Wall Street before the credit crisis, but when it was over nearly 250,000 people had lost jobs. In Chicago, where the CME held title to the world’s largest futures and options trading floor, the exodus had begun long ago as electronic trading swept the industry.

The credit crisis killed the game, but there were two other events that put the icing on the cake. The first was the demise of MF Global and then the thievery of Russ Wasendorf Sr., who admitted to stealing over $200 million in customer segregated funds to finance his lifestyle. He betrayed his family, employees and every person he had ever done business with. There was already a bad taste in people’s mouths after the credit crisis, but MF and PFG delivered a 1-2 punch to the futures and options trading industry that can never be fixed.

Futures Traders: A Rare Breed

I have always said that futures trading was something that people did when they had a little extra money to play with, but it’s a simple fact that if you can’t pay your electric bill or mortgage it’s highly unlikely you are trading futures and options. In 2007 ThinkorSwim boasted that it had over 200,000 futures accounts, and I have heard even higher numbers. My guess is they still have thousands of accounts but the number that trade on a daily basis is extremely low.

Over the years futures traders have become a rare breed. Many retail customers stopped trading because they don’t have the money to lose and feel the game is fixed, overrun by algorithmic programs that jump in front of your bid or offer or run your buy and sell stops all day. Either way, we are a lot smaller crowd than we used to be, and it’s not a crowd that’s getting any younger.

In today’s high-flying world of trading, computer programs make up as much as 80% of the daily volume. It was never an easy game to play, but trading against robots that never have losing days has skewed the business away from the little guys. That’s why it’s so important to have a plan and proper risk management in place. As the MrTopStep rules goes: Get in, get out, don’t fall in love with your position.

The MrTopStep crew is working overtime to make sure the PitBull Unplugged webinar will be a smashing success. There are a few others doing webinars on Saturday and all I have to say is good luck. Our webinar will include one of the best independent traders of our time, a look at MarketDelta, LiveSquawk, and Marlin Cobb from MrTopStep will be showing the MiM and some other cool stuff we are working on. I hope to see all of you there.

Thank you,
Danny Riley AKA MrTopStep

MrTopStep Unplugged Feb 28th webinar featuring the PitBull Marty Schwartz.

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MOC sell $1bil to 1.7bil

Our view: The mutual funds started selling as we go into the month end. After weeks of buying, they turned into sellers yesterday in big size. I don’t promise to know it all and I do make mistakes, but I think the ESH15 is overextended and due for a pullback, and yesterday’s selling on the close only adds to that idea. The S&P got killed in January and has rallied 1435 handles from its March 2009 low. Despite the Russians and the Greeks, it’s full steam ahead.
Our view is again to sell the rallies and buy weakness with tight sell stops. The Stop-o-Meter is running out of upside buy stops and the downside stops are starting to build up.

“S&P 500 Futures: Running the Buy Stops and New All Time Highs”

As always, please use protective buy and sell stops when trading futures and options.

• In Asia 8 out of 11 markets quoted closed higher: Shanghai Comp -0.56%, Hang Seng +0.11% Nikkei -0.10%
• In Europe 6 of 12 markets are trading higher: DAX +0.03%, FTSE -0.27%, MICEX -1.72%, Athens GD.AT +0.51% at 5:00am CT
• Fair value: S&P -2.31, Nasdaq -0.92, Dow -26.07
• Total volume: 1mil ESH and 2k SPH traded
• Economic schedule: MBA purchase applications, new home sales, Janet Yellen speaks, EIA petroleum status report and a 5-year note auction.

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