As the chart above shows, the S&P futures did exactly what we thought they would do. When we called the “bus too full” at the 2113-2115 level, I said that the futures had a potential to go to 2120 originally, then we said 2120 to 2125 – on top of that we said that once the S&P completed that rise, it would fall 30 to 35 handles to the 2085 area. We saw that below 2100 were sell stops that would push the futures down.

Instead of me just talking about the flow I put out, I am going to copy some of it from yesterday’s action. I was wrong on the early low, but once the ESH15 traded down to 2085.25 and started going back up, all I could think of was my daily view I put out every morning in the Opening Print (Sign up for the Opening Print). Everything I do is time-stamped, and I suggest you go back to yesterday’s chart and check the times I put out. This is not to brag about my psychic powers; I’m saying the market will show you what’s moving it if you pay close enough attention.

Before we begin, I first want to say that I respect the opinions of all traders, but like you, that doesn’t necessarily mean their opinion fits my view. I do not now, and nor do I ever want to say I know more than you … because quite simply, I don’t!

It’s 5:30 CT and the ESH15 is trading 2103.25. Is the most recent selloff over? I get the feeling it may not be over. We may keep the S&P a little weak during the middle of the week and then let Friday’s jobs number do the heavy lifting. Either way, I don’t think there is a lot of downside left, maybe a push down to 2090-2085, but even that may be hard to do. The ESH15 tried twice since last Friday to break 2100, but it has held. Despite the selloff the ESH15 only did 1.23 million contracts yesterday. That’s not good for a day when the S&P sells off 16 handles from its high to low.

Here’s the actual transcript of what I said on the record:

09:31:37 TRADINGDATA2: (bshepard) first print 2098.80   Globex es range 2096.75 – 2104.75 w/ 150k volume

09:32:32 TRADINGDATA2: (bshepard) opg range 2098.70 – 2099.50 – yesterdays RTH’s range bigs 2095.50 – 2110.70 settlement 2104.80 down 9.1 handles.

09:32:56 TRADINGDATA2: (driley) sell program off the open

09:33:32 TRADINGDATA2: (driley) I think we retest and take out yesterday lows and get down to the 2090ish  level and then the mutual funds come in and do their push back up.

09:34:37 TRADINGDATA2: (driley) sell stops all over the place down to 2085

09:36:22 TRADINGDATA2: (driley) 5 buys off the lows but I think we go down through here.. looks to easy

09:37:28 TRADINGDATA2: (driley) 5.2k ESH sold on 5 sell imbalances

09:39:34 TRADINGDATA2: (driley) My gut tells me we have not seen the lows

09:42:42 TRADINGDATA2: (driley) 8k ESH sold on the last  7 sell imbalances

09:46:54 TRADINGDATA2: (driley) I think we bounce

09:48:43 TRADINGDATA2: (driley) 1k buys on the 89.25s and 950 buys on the 89.75s

09:50:08 TRADINGDATA2: (driley) 3 buys 3.8k ESH bought

09:51:45 TRADINGDATA2: (driley) sellers still filtering in

09:53:18 TRADINGDATA2: (driley) buys showing up on the 2089.50s and 2089.75s

10:06:25 TRADINGDATA2: (driley) 4 sells and a retest

10:18:08 TRADINGDATA2: (driley) I think we are at or near the early lows

10:18:39 TRADINGDATA2: (driley) The ESH has run the stops exactly down to where I said the ES could initially go

10:29:13 TRADINGDATA2: (driley) I think we now head back to the 2093-2094 level

10:29:24 TRADINGDATA2: (driley) run some stops above 2090.50

10:35:26 TRADINGDATA2: (driley) small buy program

10:40:15 TRADINGDATA2: (driley) I don’t think we are done going up

10:45:12 TRADINGDATA2: (driley) buy program

11:23:28 TRADINGDATA2: (driley) remember this..

11:23:33 TRADINGDATA2: (driley) 10:29:13 TRADINGDATA2: (driley) I think we now head back to the 93-94 level

TRADINGDATA2: (driley) I think we now head back to the 93-94 level

11:33:35 TRADINGDATA2: (driley)  tired now.. maybe rally a little more, oull back a bit into the European close and then rally later

11:36:21 TRADINGDATA2: (driley) 1.5k lot sale on the 06.50s

11:39:53 TRADINGDATA2: (driley) 1.8k ESH sold on the 96.50s and another 1.8 sold on the 96.00s

11:41:47 TRADINGDATA2: (driley) 5k sold on the 96.00s

11:43:47 TRADINGDATA2: (driley) 6.7k sells by 4.1k  on the 2096.00s

11:44:34 TRADINGDATA2: (driley) huge size trading at 2096

11:46:03 TRADINGDATA2: (driley) ened up 7.3k by 4.6k on the 96.00s

11:58:56 TRADINGDATA2: (driley) 5.5k ESH15s sold on 5 sell imbalances

12:11:25 TRADINGDATA2: (driley) small buying showing back up

12:18:06 TRADINGDATA2: (driley) 6 buys 4.5k ES bought

12:49:18 TRADINGDATA2: (driley) I told the PitBull we were going back to 2102-2103 when we were trading 2088

12:49:47 TRADINGDATA2: (driley) 3.8k sold on the 2099.50s

01:23:20 TRADINGDATA2: (driley) Noon balloon

02:19:24 TRADINGDATA2: (driley) I think we start to go back up now

02:19:44 TRADINGDATA2: (driley) this was the pull back I was looking for

03:28:56 TRADINGDATA2: (bshepard) MiM sell $ 193M

03:37:17 TRADINGDATA2: (driley) 1.7k sold on the 98.25s

03:45:49 TRADINGDATA2: (driley) 8 mil to buy.. u knew that was coming

03:50:09 TRADINGDATA2: (driley) dough u see the imbalance?

03:51:36 dougkjefco: seeing B 400

03:51:41 TRADINGDATA2: (driley) k

03:51:51 TRADINGDATA2: (driley) MOC buy $400mil

I know this was a long list, but go back to any post you like and check time and sales for what unfolded after every blast. This is what I did and still do for the PitBull, the traders in the MrTopStep trading room, and the institutions on the Icechat. It’s called trading flow.

The Asian markets closed mostly lower and Europe 10 of 12 markets are trading higher this morning. Today’s economic calendar: Chain store sales, Challenger job-cut report, jobless claims, productivity and costs, Gallup US Payroll to Population, factory orders, EIA natural gas report, 3- and 10-year note auction, 30-year bond auction, Treasury STRIPS, Fed balance sheet and money supply.

S&P down 5 out of the last 7

Our view: Is the selloff over? I think so, but that doesn’t mean the ESH15 can’t trade down again. We have a barrage of numbers coming out and at least for the first part of the day that will be the main focus. Yes, volume in the ESH15 picked up, but compared to what? The 1.8mil contracts a day it was doing in January or the 1.1mil a day we have been seeing for the last 3 or 4 weeks? Clearly, the higher the S&P goes, the less volume there is. Our view is buy the pullback … here comes Europe and their quantitative easing … hard for the US to raise rates when that’s starting!

“Think Like an Algo”

If you have not signed up for the BootCamp you only have a few days to do so…please sign up NOW!

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 -0.95%, Hang Seng -1.11%, Nikkei +0.26%
• At 5:30 am CT in Europe 10 of 12 markets are trading higher: DAX +0.46%, FTSE +0.27%, MICEX +1.13%, Athens GD.AT -0.13%
• Fair value: S&P -1.46 , Nasdaq -0.56 , Dow -16.63
• Total volume: 1.43mil ESH and 11k SPH traded
• Economic schedule: Chain store sales, Challenger job-cut report, jobless claims, productivity and costs, Gallup US Payroll to Population, factory orders, EIA natural gas report, 3- and 10-year note auction, 30-year bond auction, Treasury STRIPS, Fed balance sheet and money supply.

[s_static_display]