Tuesday’s trade started with slightly higher GLOBEX volume of 140k ESU and 1.1k SPU traded. At 8:30 the market opened 3.5 handles lower. The international trade number came in at -34.22, much higher than the estimated -43.5, and the Redbook came in at 1.00. We had a feeling the S&P was heading to a down day (a Turnaround Tuesday in the southward direction) and that is how it started out.
After opening at 1699.00 to 1698.80 the SPU initially climbed to an early high of 1700.30 and then started selling off. As it did the premium levels between the ESU and the S&P cash set up index arbitrage sell programs and with the MrTopStep Stop-O-Meter pointing to all the downside sell stops it was one sell program after another, all the way down to an early 1690.50 low and a MrTopStep 10-Handle Rule by 9:45 CT.
Tale Of the Tape
Below you can see exactly what was posted in the IM-Pro traders’ chat room. In order to make it real we suggest you do a T&S (time & sales) and see just when and where the money was flowing at each point.
[quote style=”1″] iceChat (08:49:55): down 5 and searching for sell stops
The S&P ran the 1699-1705 stops (I put out up to 1706) and are plain and simple TIRED
Right now the path of least resistance is lower
iceChat (08:52:46):the flavor so far has been small index arb sell programs
iceChat (08:53:04):searching for sell stops
iceChat (08:58:46): desk does not think we have seen the early low yet / bounce? sure but we dont think the early low is in yet
iceChat (09:04:13): low delta put buyers here and spx
iceChat (09:06:53):sell programs not over
iceChat (09:07:18): Stop-o-meter pointing to downside sell stops
iceChat (09:18:54): still dont think the sell programs are over yet
iceChat (09:23:04): still seeing “small” sell programs here
iceChat (09:34:47): all sell programs and sell stops
iceChat (09:35:21): MrTopStep 10 handle rule
iceChat TRADINGDATA2: 1691 area support[/quote]
The low came in at 1688.90 and then traded up to the 1690.50 area. Volume was considerably higher today. Yesterday’s total volume was 875k ESUs and at 10:15 CT today, total volume was already 700k . After the low the ESU gradually traded back up to the 1693.00 area at 11:55. Just before 1:00 PM it traded up to 1694.80.
That’s when we shot this out:
[quote style=”1″] 12:41:37: 920k ESU trade, we had the sell off and bounce and now it feels like the rally maybe stalling.[/quote]
Not long afterwards, the ESU sold back off down to the 1691.00 area. After the pullback the ESU got hit by a small buy program that pushed the futures back up to the 1693 area. There it moved sideways as the market struggled to decide whether to rally or sell off again.
At that point we turned on the MIM (MrTopStep Imbalance Meter) to see the early closing imbalance data. It showed 61% to the sell side, but it was too soon to know what further data might reveal. At 2:30 the ESU was trading at the 1693.00 area where it stayed until just before the 2:45 cash imbalance when it popped up to the 1694.50 area.
The MIM (MrTopStep Imbalance Meter ) showed 63% sell side. At 2:47 the cash imbalalce showed MOC sell $ 90mil and not long after the ESU was trading back down to the 1692 .00 area. On the 3:00 cash close the ESU traded 1692.80 and then went on to settle at 1694.00 on the 3:15 cash close.
In the end the sell off was both deserved and long overdue…