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Brian's Wednesday Recap: Mid-Month Markup, Safety First!

Brian Shepard


Collective Intelligence!
David Tepper SPX 1900 buy program, began yesterday with the 6:45CT premarket interview on CNBC and may still be in motion...as we are in the mid-month markup - market tendency is a bullish bias as portfolio managers chase performance in the middle of and at month end dividend reinvest. Roger Volz: Tepper's 1900 can be seen in weeklies ES measuring projections off 2007 high to 2009 low....1548/ 1891/others include 2106/2457. ES 60 min range to start 1648.75> 1656.50 // 1644.00> 1639.75. ES first wkly OB > 1652-1674 with top of current regression channel series at 1717.

Market Vane's Bullish Sentiment SP1 70 (Oct 2007 high 72), ND1 73 (recent high 81)...DXY 70, JPY 17, GBP 30, EUR 35....gold 42, SI 37, HG 37....CL1 43, HO 37, RB 63, NG 39.....Soy & soymeal leads grains 69/64.....softs 30-40s....meats 40s. Also, S+P PUT OUT A REPORT THAT THE CHINESE CORPORATE BOND MARKET WILL SURPASS THE US CORPORATE BOND MARKET WITHIN TWO YEARS... TALK ABOUT THE US BUDGET DEFICIT BEING REDUCED TO THE 4% LEVEL...DOWN FROM 7% LAST YEAR AND 10% THE YEAR BEFORE... INCOME PUT INTO THE LAST QUARTER OF 2012 AND THE 100 BILLION PAID BY FANNIE AND FREDDIE HELPING....TAPERING IS CLOSER THAN we think?

Europe: Another Quarter; More Contraction. GDP fell 0.2 percent in Q1 2013. A slight recovery in Germany was insufficient to save France and Italy. This is the sixth quarterly decline. The recession has now run longer than the 2008-2009 economic downturn. Germany has 1/3 of the economic pie, but its economists stalled, expanding a paltry 0.1 percent in the quarter. Domestically, due to no effort by any of our leaders, the deficit is shrinking rapidly. The CBO estimates this year’s federal deficit is to shrivel to $642 billion. Not really shriveling, but you get the idea. It has fallen from two previous estimates of $1.08 trillion to $845 billion to the latest guess. The better report is due to increased revenue and cuts made by sequestration. However, it may impede a longer lasting budget agreement that would address long-term fiscal irregularities. The watchword for the energy market is demand since supply is more than ample at the moment. This is being telegraphed by the calendar spreads narrowing in backwardation. A surge of heat has helped natural gas rise from its nadir of last week - posted by Stanton Analytics.

Regarding the gold short from 1465/68 posted here early last week: If you scaled out of some yesterday or moved stops down, I would recommend at this time keeping stops as is or only scaling down a few dollars. Target the april lows now (1325/30ish) on the trailers - posted by Matt Z at  (09:57).

Maybe I should check to see what is posted at www.mrtopstep.com ;). THE THURSDAY/ FRIDAY LOW THE WEEK BEFORE EXPIRATION: This is a ‘PIT BULL’ trading rule. The S&P tends to make a low on the Thursday or Friday the week before the expiration (more so on the quartiles). The rule is to look to buy weakness on that Thursday or Friday looking for a low to hold into Monday or even into the expiration itself. Generally, the trade is to buy on Friday and hold into Monday. Also, while you are visiting - be sure to click on the education tab and check the webinars for your particular interest http://bit.ly/Yias2M

Ouch! "We are coming into the week bearish the ES and bullish Treasuries (short ES calls and short ZB puts). We are recommending that our clients sell the July ZB 140 puts for 25 to 28 ticks. This strike has tripled in value in a few days...if we bounce or consolidate, they stand to lose value quickly" - posted by Carley Garner earlier in the week.  

I do pay attention to weird trades, especially in the options market (see above for the THURSDAY/ FRIDAY LOW THE WEEK BEFORE EXPIRATION.... so maybe a good idea to caution against getting too long up here into expiration - safety first! The following is sage advice: Roger Volz the monthly... quarterlies have a lot of room - let the market make a top then will have plenty of room to downside. Downside catalyst? Have congress murmur capital gains tax increase/ HFT trading fee increase or some type of financial tax will put cold water on this pronto.....
Webinar!-- Join PivotBoss this Saturday at MrTopStep as he reveals his approach for forecasting accurate targets with the ADR method, for real-time and swing trading -- http://bit.ly/18IMULL

My dental work is better than my chart work lately... So, I pay attention to the harmonics from Kathy at http://structuraltrading.com  rotations:
6E http://screencast.com/t/1hHRezvT   
DAX http://screencast.com/t/uKsqHQgwsTqY    
SPY  http://screencast.com/t/VCzHyJVE    
NQ http://screencast.com/t/3yYgUhhoE     
ES http://screencast.com/t/2V8YpbrT   
CL http://screencast.com/t/i0FalFmbA4e

Today’s S&P 500 trade started with 250k ESM and 1.1k SPM traded on Globex, trading range was 1648.40-1644.20. Monday’s regular trading hours (RTH’s), pit session trading range was 1649.00-1631.70 before settling at 1648.00, up 17.2 handles. Treasuries drew "very decent buying out of the chute" after the 10-year note futures contract "held the 200-day moving average on the 10-year contract of 131-16+, which coincides with the 62% Fibonacci retracement level" around 6:43am ET. Traders had cited US accounts buying and also central banks buying this morning in NY, and mixed flows at the session highs including profit-taking; now all await post-11am ET Fed outright purchase results in 2023-31 Tsys to see how many Tsys the dealers had offered into the Fed after Tues Fed outright purchase had the largest offer/cover ratio since Feb. Also, at (08:23CT) John Monaco posted the NYSE opening imbalance was 70% sell side.

The regular trading hours opened 3 handles lower at 1644.50 to 1645.30, marking the intraday low before the ramp took the equities into new record territory again. We have seen this type of price action before... The mid-month markup was back at work as once again the S&P marked the low of the day in the opening range. Another morning buy program elected the stops above 1650 and the indices found some pockets of air up to the new contract high of 1659.50 as sellers were few and far between. At (12:28) HITMANGOLF shared some traders sentiment with us > not sure if you're seeing the same thing but i got a lot of emotional im/emails into todays high -- expirys usually trade both ways in my experience. The SPM was trading 1655 area when the closing imbalance showed a large $750M to the buy side. The cash close traded 1656.40 area before the futures settled at 1654.30, up  6.3 handles.  

Brian Shepard is a 20-year exchange member of the CME Group.

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DISCLAIMER: The information and data in the above report were obtained from sources considered reliable. Opinions, market data, and recommendations are subject to change at any time. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any commodities or securities.