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Danny Riley

Do they work all the time? No, but when they do we guarantee you will wish you had them in your trading toolbox.   Let’s face it, there are few things that have not changed since the onset of the credit crisis  in 2007, and electronic futures trading is one of them. It has ushered in a new era of traders and they don't use their hands to bid or offer and they don't use keyboards either. Because of all the program and algorithmic trading going on in the futures markets, traders have had to adapt to a “new world trading order” or get run over. Adapt or get out of the way is the only way to survive.    Back at the old Merc (CME) at 30 S. Wacker was where the MrTopStep trading rules actually started. Were they written down? No, but they were in my head, it’s called pattern recognition.  I knew that certain patterns existed in the S&P at different times throughout the day and 90% revolved around order flow in the open outcry pits. Now that 99% of all futures are traded online it's harder to see, but if you know what patterns to look for it can make your life a lot easier. Jobs Friday was a perfect example of what MrTopStep calls “Counter-Trend Friday.” Please let me explain how the rule works and how it can help your trading account.   COUNTER-TREND FRIDAY Over the years we’ve found this trade works best on an unemployment Friday when the S&P futures gap sharply up or down on “oversized” pre-market Globex volumes of 400k to 600k ES traded before the 8:30 open. This is a "fade the 'bus too full'" trade. The e-mini S&P is down 6 handles at 6:00 am and then down another 8 handles (or more) after the jobs number is released. Now the S&P is down 14 handles on the 8:30 CT open. With 400,000-plus ES traded before the open, that tells us that many traders have already voted. Depending on the price action (PA) the idea is to buy the sharply lower open or the first 2-5 handle drop after the sharply lower open. The idea behind this is that with so many e-minis traded and it being a Friday, most traders cannot hold the futures over the weekend, thus they put in protective buy stops. With all the selling used up pre-open, the ES starts to short cover into the buy stops, which lift the offer side of an index arbitrage buy program.      This rule is a great example of how MrTopStep looks at the markets and why the S&P rallied so much after the sharply lower open Friday morning. After seeing how customer orders are placed over the last 35 years it has given us insight that no other service offers. The above trading rule was exactly how Friday played out. If you would like to learn more about MrTopStep and other trading rules, please go to https://mr-topstep.com/index.php/education and click on Trading Rules 101.      Our view: Based on how the ESM closed, one would think we could see higher prices this morning. On the flip side; 7 out of the 11 Mondays so far this year have been down. With no economic news out this morning, we think we could be in for a long day. We lean to selling the early rally and buying weakness. As always, keep an eye on the 10-handle rule and please use stops when trading futures.

  • It’s 7:00 a.m. and the ESM is trading 1551.75, up 5.75 handles; crude is trading 93.50, up 80 cents; and the euro is trading 1.3034, up 15 pips.
  • In Asia, 9 out of 11 markets closed lower (Shanghai Comp -0.62%, Hang Seng -0.04%, Nikkei +2.80%).
  • In Europe, 9 out of 12 markets are trading higher (CAC +0.74%, DAX +0.23%).
  • Today’s headline: “S&P 500 Futures Seen Higher” 
  • Total volume: 2.26mil ESM and 8.7k SPM traded
  • Economic calendar: There are no scheduled economic releases.  
  • Fair value: S&P +3.87, NASDAQ +7.30

MrTopStep Closing Print Video: https://mr-topstep.com/index.php/multimedia/video/latest/closing-print-4-5-2013    Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.  _____________________________________________________ Follow us on Twitter @MrTopStep https://twitter.com/mrtopstep Sign up for our free mailing list at http://mrtopstep.com/ for full report. 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.    {jathumbnailoff}   S&P, futures trading, ES, E-mini, day trading, corporate earnings, ^GSPC:SNP, SPY:NYSEArca, ESM13:CME