[plain]Before we start: IMPORTANT: We shut down our “trial room” a few months ago and replaced it with the new MrTopStep Boot Camp. The first one we did a few months ago was very successful. We had over 50 people sign up and everyone loved it. This is a unique way to get a look at our service, what we do and how we help people make money and stay on top of the markets. The last day to sign up for the Boot Camp is today, Nov. 8. You will also have access to the MrTopStep Closing Imbalance meter and all the tools we use during the day. This is an over $450 value for just $7 for a full week and it’s a great way to meet the MrTopStep “collective.” Click here to sign up.[/plain]We said the Twitter IPO [TWTR:NYSE] would come in higher than expected and we also said the “oversold” event could mark a top in stocks and the S&P [ESZ13:CME]. After an early rally, the premium between the S&P 500 futures [ESZ13:CME] and the S&P 500 cash [^GSPC:SNP] went from doing buy programs to index arbitrage sell programs and the S&P just fell apart.[youtube id=”RcUuclvXlFs” align=”right” maxwidth=”300″]
Why did the S&P sell off while Twitter soared? The answer is simple: because markets have rallied too much. You could clearly see it in yesterday’s selling of the Twitter news. Over the the last 28 years of being in the S&Ps we have seen many times that the good news of an IPO can end up a negative for the rest of the markets.
The first sign that the markets were going down yesterday was the early weakness in the Russell and Nasdaq. Both were extremely weak early in the day and never improved. Once the algorithms started chasing downside sell stops it turned into a continuous sell program. After making new highs and running buy stops after the open, the S&P took a header and swept the downside sell stops. It literally was one sell program after another.[pullquote]In Asia 10 of 11 markets closed lower and 9 out of 12 European markets are lower. This morning’s economic calendar includes the unemployment number, personal income and outlays, consumer sentiment, JOLTZ , Federal Reserve Chairman Ben Bernanke on a panel at the IMF discussing financial crisis panic in Washington at 3:30 ET and San Francisco Fed President John Williams speech on the economy and monetary policy in Los Angeles at 4 PM CT.[/pullquote]
Our view: Twitter [TWTR:NYSE] rally a contrast to weakness in the market
There are turning points in just about everything, but one turning point that occurred in the S&P came in at 8:57 CT yesterday morning. It’s called a “premium flip.” While many of you do not follow program trading as much as I do, I saw what happened and put it out right when I saw it. A premium flip is when the S&P futures go from having buy-program levels to flipping to sell programs. Right after the ESZ traded up to yesterday’s high at 1771 and traded back down to 1769 I called it out in the trading room and the S&P sold off 26.5 handles after it.
While the main focus today will be on the jobs number, we will still be looking for the Pit Bull’s Thursday / Friday low the week before the expiration and for MrTopStep’s “Late Friday Rip.” We think the job creation number will come in under 100,000, below the 120,000 jobs forecasted. If that is the case and we get a sharply lower open on Globex volume of 300,000 to 400,000 we would be looking at another MrTopStep Trading rule called Counter Trend Friday. Our view is we go down early and rally late. According to the Ned Davis S&P cash study the S&P has been up 16 / down 13 of the last 29 occasions. You take it from there …
As always, keep an eye on the 10-handle rule and please use stops when trading futures and options.
In Asia, 10 out of 11 markets closed lower: Shanghai Comp. -1.09% , Hang Seng -0.60%, Nikkei -1.00%.
In Europe, 9 of 12 markets are trading lower: DAX -0.63%, FTSE -0.45%.
Morning headline: “S&P Futures Seen Higher Ahead of Jobs Report”
Total volume: 2.46 million ESZ and 7.7k SPZ traded
Economic calendar: Jobs number, personal income and outlays, consumer sentiment, JOLTZ , Federal Reserve Chairman Ben Bernanke on panel at IMF discussing financial crisis panic, in Washington 3:30 ET and San Francisco Fed President John Williams speech on the economy and monetary policy in Los Angeles