Chart by David @TradingFibz

See how things work? Last Thursday the S&P closed on its lows due to geopolitical concerns surrounding North Korea’s possible nuclear bomb test, and what actually happened was a failed long range missile launch. With a 2324.00 low and a 2337.50 close on Thursday the S&P 500 futures (ESM17:CME) could not have looked worse, but when Globex opened Sunday night and the futures traded down to 2322.50, the buyers started to move back in. They continued to move back in going into Monday’s 8:30 CT futures open, and followed through for much of the day.

After an early run up to 2333.25 the ES double topped and sold back off down to the VWAP at 2328.75. The ‘pop’ was a good example of how the markets close in one direction and then move the other way. Part of it was the news, and the other part of it was traders being off base, or short. Once the news was out of the way, and the headline algos had pushed the futures down far enough, the ‘short squeeze’ was on.

After the pullback the ES shot up to 2337.75 and then trickled back down to the 2333.00 area before rallying back up to 2337.50. Looking at the ES chart there were a series of 5 higher lows, or back and fill patterns, showing. At 12:30 CT the (ESM17:CME) was trading at 2338.50, just 1 handle off the day’s low. Total volume was only 550,000, with 116,000 of that volume coming from Globex pre- 8:30 open. All day long I talked about how everyone was offsides.

Once another higher low was made, the ESM17 ripped higher into the close, trading all the way up to 2346.00 as the MiM went from small to buy to over $850 million to buy. Like I said in the MrTopStep forum, several of the trading rules that the PitBull and I used to use when I took his S&P orders on the floor applied to yesterday’s trade. Below is the list of MrTopStep’s trading rules.

Download all of the MrTopStep Trading Rules here

In the end it wasn’t just the S&P that was moving, oil prices had their biggest drop since March, the dollar hit a five month low against the Japanese YEN, gold prices rallied to a fresh five month high over geopolitical risk, and the bonds fell following its biggest weekly price rally since June.

Like I have said many times, the programs that push the futures lower are the same ones that pull it back up. The robots don’t care which side of the market they are on as long as they can step in front of our bids and offers and run our stops. It’s a colossal mechanism that is only concerned with taking money out of your trading account.

While You Were Sleeping

Overnight Asian equity markets were mixed, but with a mostly lower tone. Europe is in the red across the board this morning as British PM May has been giving remarks. The S&P 500 futures in are also weaker today after opening the Globex session at 2345.00. The high was made at 2347.00 very early in the session on the Tokyo open, and since then  traded sideways into the Asian close. Some selling came in on the European open pushing the ESM down to 2334.50, down 10.50 handles, and has since rallied to 2338.50 at 6am cst, down 6.50 handles, with just over 150k contracts traded.

In Asia, 6 out of 11 markets closed lower (Shanghai -0.79%), and in Europe 12 out of 12 markets are trading lower this morning (FTSE -1.43%). Today’s economic calendar includes Housing Starts, Redbook, Esther George Speaks, Industrial Production, and a 4-Week Bill Auction.

Our View

I am doing my best to get back to reading the volume. It’s how I have always looked at the markets. Unfortunately, over the last several months, I have gotten away from it. I know that was a big mistake. When you have a tool that helps you make money, use it. I believe that going back to the basics helps me get a better read on the markets. When I try and add stuff it only throws my trading off.

After the S&P was down 7 out of the last 9 session, or down 52 handles over that period, yesterday’s rally took back close to 50% of the losses. Our view is that the rally is not over. You can sell the early rallies and buy weakness, or you can just go with the trend and buy weakness.

PitBull: CLM osc 15/16 turns up on a close above 5494, ESM osc -14/-5 osc turns up on a close above 233741, VIX osc 27/9 turns up on a close above 1749

Market Vitals for Tuesday 04-18-2017

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

  • In Asia 6 out of 11 markets closed lower: Shanghai Comp -0.79%, Hang Seng -1.39%, Nikkei +0.35%
  • In Europe 12 out of 12 markets are trading lower: CAC -1.36%, DAX -0.66, FTSE -1.43%
  • Fair Value: S&P -3.42, NASDAQ -1.04, Dow -65.96
  • Total Volume: 981k ESM and 4.1 k SPM traded


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