Volatility Continues to Drive Big Trading Ranges
…and now we get the Fed
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Our View
It’s ‘last call’ for July and things are getting a bit spooky. There was another 100 point range in the ES, NYSE volume was 540 million shares at 3:50, and they whacked out over 500 mil shares on the close.
In the ES, they ran the upside buy stops then they ran the downside sell stops. The VIX traded up to 18.32, sold off down to 16.83 and traded back up to 17.83. Can you imagine, this is going to go on indefinitely and I think we are on the cusp of some very big moves.
I’m going to keep it light today. I can’t tell you anything you don’t already know.
Our Lean
When you sell a higher open and the ES or NQ keep falling, you are supposed to hold at least a small short — not that I did. But I did sell the open and the pop — in fact I sold 5525.00s in the ES and the NQ, and when they dropped I covered and got long. Despite the trade going my way, I became complacent and got out at a small loss and watched the NQ fall 400 points and I was the one that said sell the early rallies. It’s days like yesterday that separate the men from the boys.
Our Lean: Today has a total overload of news and events:
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Earnings from last night (AMD, SBUX, MSFT), before the open (BA), and after the close (META, ARM, QCOM)
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ADP report & Eurozone CPI
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Day 2 of the Fed Meeting and Powell’s press conference
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The last trading day of July
Tomorrow and Friday don’t let up either, with AAPL, AMZN & INTC reporting earnings and the monthly jobs report.
Here is what we knew: The ES is up 25 points at 5477, the ES and NQ are very oversold and I am wondering how much of the actual rebalance selling is left for the final trading day of July. I want to keep an eye on the NQ for the ES bid / NQ offered price action, if it’s still floating around we are going back down.
I also want to point out that the ES held its July 25th 5432.50 low when the ES sold off 50 points late in the day. What I’m sensing is there are going to be a lot of two-way price action. Like I said, we ran the buy stops and then ran the sell stops… you tell me what’s next!
MrTopStep Levels:
MiM and Daily Recap
ES Recap
The ES traded up to 5525.25 on Globex and opened Tuesday’s regular session at 5514.25. After the open, the ES traded at 5513.50 and then rallied to the high of the day at 5527.50 at 9:44. It dropped to 5492.50 at 10:40, rallied back to the 5502 area, and then sold off to 5465.50. The ES rallied to 5479.75 at 11:28, then sold off to 5455.25 at 12:04. It rallied to 5466.00 and then sold off to a new low at 12:10, traded back up to 5465.00, and then sold off to 5438.00 at 1:07. It rallied 42 points to 5480.00 at 2:22.
After the rally, the ES sold off to 5460.75 at 3:02, rallied to 5473.00, pulled back to 5466.00, and then rallied 10 points to 5476.00 at 3:47. It traded 5485.25 at 3:48 and 5487.25 as the 3:50 cash imbalance showed $3.2 billion to buy. The ES pulled back to 5480.25 and traded at 5472.75 on the 4:00 cash close.
After 4:00, the ES sold off to 5455.50 after MSFT beat expectations but cloud sales fell, and the ES traded back down to 5433.00 at 4:02 — just 2 ticks above the July 25th low of 5432.50, marking a 50.25-point drop. It rallied back to 5460.00 and traded at 5452.00 on the 5:00 futures close, down 51 points or -0.9%. The NQ settled at 18,681.25, down 348 points or -1.8%, and the RTY closed up 0.35% on the day. The Russell, which was down a few percent just prior to the rotation, is now up 11% compared to the S&P 500’s and Nasdaq’s 14% gains in 2024.
In the end, it was another day of selling every rally until late in the day when the boys with the better seats front-ran the $3.4 billion to buy. In terms of the ES’s overall tone, it was held captive to the weaker NQ. In terms of the ES’s overall trade, volume was on the high side at 1.985 million contracts traded.
Technical Edge
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NYSE Breadth: 57% Upside Volume
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Nasdaq Breadth: 44% Upside Volume
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Advance/Decline: 62% Advance
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VIX: ~16.50
Guest Post — Polaris Trading Group
Topic: Taylor 3 Day Cycle
Author: David D Dube’ (a.k.a. PTGDavid)
Prior Session was Cycle Day 3: Positive Three-Day Cycle as price fulfilled upside target zone (5525 – 5530) as outlined in prior DTS Briefing 7.30.24. Long Liquidation accelerated once the Line-in-Sand (5500) broke with nowhere to hide for the bulls. Final flush and reversal unfolded from 5445 CD1 Extreme Violation Level. Sharp rally back to the 3 Day Central Pivot Zone (5485 – 5490) was the final nail in the coffin for shorts.
Crazy as the RTH Session was, Mr. Softie earnings post close drove the price back down to 5433 and at time of this writing (8 pm et) price has rallied back to 5480. Welcome to the World of Futures Trading. Range was 94 handles on 1.983M contracts exchanged.
…Transition from Cycle Day 3 to Cycle Day 1
This leads us into Cycle Day 1: Today begins a new cycle with the CD1 Average Decline having been well exceeded. The Main Event for today is of course the FED Policy Statement and Presser. (see above for notes). Multi-Day Composite Range between 5430 – 5530 marks the current “sandbox” (playground) with elevated volatility expected to continue. There are multiple levels (too numerous to list them all) that may elicit a tradeable “response”, so we will defer to Mr. Market to show us the way forward. YOU KNOW THE DRILL!
Our discipline of maintaining positioning that is aligned with market forces continues to serve us well, so stay the course.
As such, scenarios to consider for today’s trading.
Bull Scenario: Price sustains a bid above 5470, initially targets 5490 – 5500 zone.
Bear Scenario: Price sustains an offer below 5470, initially targets 5450 – 5445 zone.
PVA High Edge = 5490 PVA Low Edge = 5441 Prior POC = 5470
*****The 3 Day Cycle has a 90% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.
Thanks for reading,
PTGDavid
Economic Calendar
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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!
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