The Band Plays on as New Highs Are on Tap

Follow @MrTopStep on Twitter and please share if you find our work valuable!

Every week, MrTopStep invites traders to an “Own the Close” contest where the closest guesstimate where the SPX will settle on Friday’s 4:00 cash close.

The winners get a free week’s access to the MrTopStep Chat and trading tools. Enter your guess now!

Our View

Everything is an event or revolves around one. If it’s not the announcement of some economic report, bond auction, crude inventories, a Fed headline, or a war threat, a big earnings report, or worries around the jobs market/economy, it’s something else. 

I don’t like saying “in the old days,” but in the late ’80s and ’90s, it was the IBM earnings. That was the single biggest event, and it was when front-running was harder to track but easier to see.

Yesterday, I had lunch with the PitBull. Of course, he complained about his body falling apart and that his stress levels were really high. I tried to explain that everyone is experiencing high stress and that trading stocks, options, ES, SPY, gold, and keeping up with all of it has gotten really hard. 

Years ago, when more algorithmic programs hit the ES, he was on a losing streak. He was upset and blamed it on electronic programs that front-run the orders or make it harder to get fills at the desired price. He knew what the future would look like and said, “They will kill the S&P just like they did the XMI.” As the programs took up more space, it became even harder for him to make money trading the S&P. He claims he has a better memory than me, but he has too many “Marty” stories to remember all of them. 

One day, after a series of trades making and losing money, he asked me what he should trade. I suggested a crude oil option spread, and he laughed at me and said, “What do you know about crude options?” I responded by calling out the call spread, which he did and made money on. Fast forward six months and the PitBull is on his way to becoming the world’s largest independent crude options trader, sometimes handling 30k or 40k contracts in a day. 

Not only were some of the largest crude desks calling me, but when he shut down two years after he started and moved to S&P options, the crude oil futures pit closed, and not long after, the option pits were done. In S&P options, he turned $35 million into $107 million, and when he reached that level, he asked me what I would do. I told him I would pull $50 million and put it in the bank, trading the remaining $57 million. If he lost it, he would still have the original $35 million he invested and $15 million in profits. 

In August 2015 — a few days after I said that, — he lost over $50 million, and then months later, he lost another $25 million. He has told me over 100 times that it was the single best piece of advice he ever got. 

The other piece of advice is something I will share with you too: If something — like trading — doesn’t make you happy, don’t do it. In Marty’s case, he says he has nothing else to do, and to that, I say you can do anything. The moral of the story is that, win or lose, you have to live your life. Trading is not everything, and just because you have a lot of money doesn’t mean you don’t have problems or stress. And lastly, it’s OK to take time off, recharge your batteries, and come back fresh.

MiM and Daily Recap

The ES rallied up to 5699.25 on Globex and then sold off down to 5684.00 at 8:50, opening Monday’s regular session at 5688.75. After the open, the ES rallied up to 5693.00 while the NQ was going straight down, and then sold off 14 points to 5679.00 with 20.2k ES traded during the drop at 9:38. The ES then rallied 21.5 points up to 5700.50 at 9:57 and subsequently sold off 31 points to 5669.50 at 10:36. It rallied up to 5686.25 at 11:27, sold off to a higher low at 5674.25, rallied up to 5685.00 at 11:56, then sold off to another higher low at 5674.25 at 12:24. 

After the low, the ES made a series of higher lows and traded up to 5698.00 at 2:36, sold off to 5689.50, then traded up to 5698.50. It sold off to 5691.25 at 3:16, traded back up to 5699.00 at 3:44, and traded at 5697.75 as the 3:50 cash imbalance showed $620 million to sell. It then traded down to 5696.25 and rallied up to 5702.75 at 3:58, finally trading at 5698.75 on the 4:00 cash close. After 4:00, the ES sold off to 5694.25 at 4:58 and settled at 5694.75, up 68 points or +1.21%. The NQ settled at 19,650.25, up 149.50 points or +0.77%. The yield on the 10-Year Note declined to 3.622%, the lowest since June 2023. Brent futures, the global oil benchmark, climbed 1.6% to $72.75 a barrel. Gold settled at $2,609.90, down 0.8 points or -0.03%, and Bitcoin futures settled at 58,335.00, down 2,050 points or -3.39% on the day.

In the end, the only thing I can say is the band played on. In terms of the ES’s overall tone, it was firm all day. In terms of the ES’s overall trade,  volumes were mostly the ESU/ESZ spreads: 1 million ESM and 1 million ESZ traded of which 75% of the volume was the ES rollover. 

Technical Edge

Guest Post  — Tradrr

Turning point week as FOMC statements incoming on Wednesday. Would imagine till that event occurs it’s a build up between these 2 zones to prepare a break up should cuts be set and inbound or settle lower on statements otherwise. Equities finishing up their roll this week and makes it slightly harder to consider volume to lean on till its finished up on expiry end of this week.

For more info on Tradrr, visit them here.

Economic Calendar

For a more complete Economic Calendar see: https://mrtopstep.com/economic-calendar/

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!