S&P 500 Futures September Quad Witch ‘Pop and Drop’

S&P 500 Futures September Quad Witch ‘Pop and Drop’

Is the sell off over? Probably not. Did everyone get bearish at the same time? They probably did. As traders we face all sorts of good and bad economic times, and with US Federal Reserve running out of options and its negative rate policy about to change, the US stock markets and investors are on edge.

After a quiet globex session the S&P 500 futures (ESZ16:CME) opened modestly higher at the 2120.50 level. They pulled back a little and then started moving higher, eventually making a daily high at 2134.00 around 9:30 CT. After the high was made the ESZ16 traded sideways, moving above and below the vwap at 2125.75, until the futures gave way to the downside. The ES fell all the way down to 2115.00 around 1:30.

The MrTopStep Imbalance Meter (MiM) was showing an early sell imbalance of $650 million to sell. Overall trade and volume were low before the sell off. After the sell off, total volume jumped to over 1.5 million contracts traded. After the low was made, the ESZ traded up to the 2121.00 area, pull back a few handles, then traded back up to the 2121.50 area. Another sell off started when the MiM started showing over $900 million to sell.

At the end of the day, the S&P 500 futures closed at 2113, down 12.5 handle, or 0.60%, a tick below Friday’s close. While the equity markets are weak, for the most part, the index futures are trading orderly since Friday’s dump.

Mixed Markets Overnight

Overnight global equity markets traded mixed but mostly lower. The ESZ traded down to 2107.75 early in the globex session, but rallied just after 9:00 pm cst. It has held a steady bid since then, trading back up to 2123.25, up 16 handles from the early low, and 10 handles from the prior close.

Today’s calendar is the heaviest of the week. At the moment, while there may be a small bounce, the path of least resistance appears to be to sell rallies. The chart is not looking good, and after some back and fill, the likelihood of a lower low appears to be strong. Levels we are watching are the 2130-35 area. Above that could trigger some buy stops, bears need to hold this price area or risk 20 handles further to the upside. Lower, back through 2110, should trigger sell stops to Monday’s globex low at 2100. Below that sell stops push to 2080.

In Asia, 6 out of 11 markets closed lower (Nikkei -1.26%), and in Europe 7 out of 11 markets are trading lower this morning (DAX +0.05%). Today’s economic calendar includes the Weekly Bill Settlement, 52-Week Bill Settlement, 3-Yr Note Settlement, 10 Yr Note Settlement, 30-Yr Bond Settlement, Jobless Claims, PPI-FD, Retail Sales, Philadelphia Fed Business Outlook Survey, Empire State Mfg Survey, Current Account, Industrial Production, Bloomberg Consumer Comfort Index, Business Inventories, EIA Natural Gas Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 10-Yr TIPS Announcement, Fed Balance Sheet, and Money Supply.

S&P Futures Down 4 Out Of the Last 5 Sessions

Our View: Last night the ESZ was trading higher at 2116-2117 and suddenly sold off down to 2107.75. After that, a grinding move higher started, taking the ESZ all the way up to 2123.00. If anything is clear, it’s that just about every trader thinks the markets are going down, and going down big.

Historically, volatility picks up in September and October and starts to level off going into the first week of November, but the election could throw a monkey-wrench into that. There has been a lot of thrashing going on, and today is the final trading day before the September Quad Witching expiration. Other than Mondays rip, it is pretty much been all downhill, but I am not sure thats how its going to work today. Our view is we lean to higher prices. Buy the weakness and sell the rallies, if you choose, but overall we lean to buying weakness.

‘MrTopStep BootCamp’

I delayed the MrTopStep BootCamp for one week because with the markets moving so much we wanted to extend the offer. That said, this bootcamp is going to offer new talent on the trading and technology side. Dave Wienke from POINT.786 is on the schedule a few times to go over his technical service and how it can help your trading. Also, Anthony Stavros from CQG will be demonstrating the platform and going over the newest product releases. It’s an exciting time at MrTopStep, and with volatility picking up, the September quad witch, and the end of the 3rd quarter just around the corner, there could be no better time to sign up. Below is the full week schedule of the boot camp. I hope to see you in there next Monday.

Thanks,
Danny ‘DBOY’ Riley

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

MrTopStep September Bootcamp is right around the corner. Sign up here to reserve your spot.

• In Asia 6 out of 11 markets closed lower: Shanghai Comp -0.68%, Hang Seng +0.63%, Nikkei -1.26%
• In Europe 7 out of 11 markets are trading lower: CAC -0.23%, DAX +0.05%, FTSE +0.26% at 6:00am ET
• Fair Value (Dec): S&P -6.75 NASDAQ -4.82, Dow -82.82
• Total Volume: 600k ESU and 15k ESU and 2.5mil ESZ and 13k SPZ traded

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