There are three books that I have kept front and center on my desk for the last 20 years. Well, two over the last 20 years and one over the last 10 years. The first one is the Market Wizards book No.1 with Marty "The Pit Bull" Schwartz. The second book is the Stock Trader's Almanac by Jeffrey Hirsch and the last one is “Program Trading for Dummies.” Fitting, huh?
This Thursday MrTopStep invites Jeffrey Hirsch down to the CME floor to see our trading desk and do some floor videos. While he is here I am going to show him our desk that sits between the S&P futures and options pits and then do my thing. I am going to give him the best “dog and pony show" (floor tour) anyone has ever given. You see, when most traders give a tour there are few that have the background I have. I started in the grain room, went to the bonds room and then over to the S&Ps. I have it down. When we tour the floor it won't just be me pointing out the pits, what they are and how they work ,we’ll be talking to the guys in the pits too. Asking questions, how does this or that work? There is no virtual tour when you're with me, it's all up close and personal. It's going to be interesting. I will get to meet Jeff, whose work I have been following every day for the last 20 years, and an old floor veteran gets to explain how some of the things he writes about affect the different markets we trade in. By the time Jeff leaves the floor his knowledge of the business from the trading floor side will be 100%. Like Jeffrey and the Trader's Almanac, there is a lot of history that we cannot forget about here on the floor of the CME.
Jackson and LaSalle is the heart of the business/financial district. For over 100 years traders have been buying and selling commodities and financial futures with hopes of making millions. New York may have the NYSE, but there is no place in the world that has a larger trading floor than the CME. They say you can fit a Boeing 747, wing to wing, in the financial room. Yes, like all businesses the CME has seen a shrinkdown during the credit crisis, but tat the end of the day the lower volumes have more to do with the general public and their appetite for risk in a severe economic downturn. Like I have said many times before, people have to pay their mortgages and their gas bill before they turn on their trading platforms.
As we go into the election, many people keep asking when the markets will start to pick up -- before or after the election? It is my guess that the markets pick up after the election, but then we will be heading into the holiday season. But I can assure you of one thing: They won't stay quiet forever. As for Jeffrey Hirsch? See you in the AM....
MrTopStep Closing Print Video: http://www.mrtopstep.com/videos/
Not to say that it can't, but the S&P does not look like it wants to go down. What it looks like to us is the S&P is “back and filling” again. What happens is everyone gets bearish the longer the S&P acts like this, but it’s actually doing exactly what it has done all the way up. Make a high, pull back 30 or 40 handles, then start squeezing out the shorts again. Today we have a decent lineup of economic reports. Our feeling is that if the ADP number comes in better, it could be a prelude to Friday’s jobs report. As for our view, we overall still lean to buying weakness, but we also know there are some good rallies to sell too. As always, keep an eye on the 10-handle rule and please use stops.
- It’s 6:00 a.m. and the ESZ is up .25 handles at 1441.25, crude is down 55 cents at 91.34 and the EC is trading 1.2919, down 6 ticks.
- In Asia 6 out of 11 markets closed lower.
- In Europe 7 out of 12 markets are trading modestly lower (CAC -0.27%, DAX +0.15%).
- Today’s headline: “US Futures Little Changed Before Services Report.”
- Economic calendar: Today: Weekly mortgage apps, ADP employment report, ISM non-mfg index, oil inventories, H-P analysts mtg; earnings from Family Dollar, Monsanto, Marriott. THURSDAY: Chain-store sales, Challenger job-cut report, jobless claims, factory orders, FOMC minutes. FRIDAY: Non-farm payrolls, consumer credit
- VOLUME: 1.6mil ESZ and 7.4k SPZ traded
- SPREADS: No SPZ/H spreads traded
- FAIR VALUE: S&P +1.5, NASDAQ +7.25
US equities opened firm following the gains abroad, but once again struggled to hold them in the face of October headwinds. Australia's surprise RBA rate cut adds to the central bank(s) theme of adding additional liquidity to the system as the global economic data continues its overall weakening recessionary trend. Chatter that the BOJ and ECB could follow in kind continues. The ECB rate decision is expected Thursday morning at 6:45CT with traders focusing on the direction Draghi takes during his presser at 7:30. As we know, the global equities have previously had impressive gains immediately following the central banks actions - laying out the implementation of the central banks backstop, but now the focus appears to be on Spain and Greece and the bailout funds and the words used to describe the backing. When will Spain ask and has Greece done enough to meet the austerity measures versus their usual rhetoric? Eurozone leaders have been adamant about keeping the union together while also focusing on juggling their own personal/party concerns and the political consequence in their respective homelands. Also, the economic, macro and earnings calendar(s) of scheduled events does pick up starting tonight and through the coming weeks. Greed versus fear, what will it be as we climb the wall of worry going into the first presidential debate, the upcoming scheduled events and the fiscal cliff headlines/chatter gaining more attention?
The sorry state of politics in this country - as we look to Friday’s employment data: The US Postal Service defaulted on a $5.6B payment for retiree funds, which was due at the end of Sept, adding to a $5.1B payment the USPS missed earlier this year. The agency also expects net operating losses of $15B for FY 2012. The USPS badly needs Congress to authorize cost cuts, but the legislature is adjourned until after the elections, at which point it will have to deal with the fiscal cliff. Also, Chicago pension liability = $21,500,000,000.00 property taxes could triple. Speechless...
Morning observations: The equity markets have been consolidating the recent rally over the last several sessions, running into trouble expanding the overnight gains and converting the 1450 area. It appears investors are defensively positioned while clawing at the wall of worry. Short-term indicators are close to oversold levels, so the market's inability to hold early gains suggests a generally weak condition. Sources say, the probabilities suggest the correction from the mid Sept. high has not yet fully run its course. Also, the government announced it is suing JPM (Bear Stearns) over mortgage-gate which seems to be adverse to Bernanke's current efforts of supporting the sector. Well, I guess JPM can afford another slap on the hand... MOODY'S SAYS STILL STUDYING SEVERAL FACTORS INCLUDING SPAIN BANK CAPITAL NEEDS, BUDGET, SIZE OF SUPPORT MECHANISMS - just, what is junk?
Tuesday started with 230k ESZ and 1.2k SPZ traded on Globex, trading range 1446.00 – 1436.00. Today’s RTH’s gapped 6.5 handles higher to 1443.50 - 1443.00, rallied up to a new high at 1445.80 and then sold off to a new low at 1438.00 by 9:30. JP Morgan sold 300-400 SPZs on the open. The auto industry reported mixed to slightly better sales without incentives. Some reports are stating prices paid being near sticker price and the outlook firming due to reduced costs from new, less paid/ benefits employees and the ailing consumers. Consumers have been holding on to their cars longer than in the past and should offer some support as they upgrade in the future. An extended uptick in jobs could help the consumer versus the feel good stimuli...With a lack of any major economic reports or current news the S&P did what it does best; it ran the downside sell stops as the techs and transports continued to weigh. The SPZ rallied up to 1443.50 area, sold off to 1441.50 area and then sold off to new lows at 1433.80 as a headline came across saying “RAJOY SAYS SPAIN BAILOUT REQUEST IS NOT IMMINENT” at 10:34 CT. That's the way this game is played now. After the low the SPZ rallied back up to the 1437.50 area and then sold off a few handles and bounced back up to the 1437.00 area. There were two very big options trades that got executed; the first was someone bought +20k March SPX 1000 puts and the other trade was in the EuroStoxx where +50k March SX5E 1750 puts were bought.
The weakness we saw in the NASDAQ reappeared again yesterday. Going into 11:30, while the SPZ was upticking the NDZ started breaking down. At one point the NDZ was down 10 ticks with the SPZ trading near unchanged. When the NDZ sold off to news at 2775.00, down 17, the SPZ took out its daily low by one handle at 1432.80. After the lows both markets short covered a bit and at 2:09 we put out an instant message saying “small buy stops 1436.80 up to 1442.00” and a few minutes later the SPZ traded up to 1437.50, pulled back down to 1336.00 area and then traded up to 1438.00 as we waited on the imbalance. At 2:45 17 of the Dow 30 were to buy small and the broader market MOC showed buy $230mil. After another brief pullback the SPZ traded up to 1438.70. On the 3:00 cash close (EOM FIX) the SPZ traded 1439.20 and then went on to settle at 1440.90 on the 3:15 futures close, up 4 handles on the day.
MrTS Charts: "WHAT'S +70 HANDLES BETWEEN FRIENDS? BOLLINGERS FOLLOW-UP ESZ / OIL / BONDS" http://goo.gl/4o6yH by EUBIE
Roger Volz, BGC Partners
SP 500 Futures 60 min Chart and Indicator ….lower high / higher low has prices squeezing into Friday’s NFP….RBA rate cut rebound sees early stall at resistance concentration from 1445.50 to 1446.50. Rising moving averages should cushion dips, at least in the am session. Our first technical downside reversal line comes in at 1437.25
ST OB > 1462.50 /// ST OS < 1422.50
Additional intraday readings
VST 5 min ……VST 5min OB > 1445.50 at 6:35am globex session /// VST OS < 1437.50
VST 15 min …reversal retest pattern > 1443.00 to start………VST 15 min OB >1450.50 /// VST OS < 1432.50
Daily Chart Focus Levels….prominent sell wicks forming in daily candlesticks but bears have not yet been able to convert finds footing against the 34-day SMA at 1427.00
SP1 Daily Resists ….….1444.00-1446.0….1453.00.…..1460.00-1461.00……1467.00….1475.00…..1478.00…………1492.00……………1506
SP1 Daily Supports….…1438.00-1436.00……..1427.00…….1419.50 ….. 1413.00 …. 1405….1401.00/ 1399…..1390.00…….1382.00
SP1 Daily OB >1478.00 /// SP1 Daily OS < 1343.00
Weekly Chart Technical Stance and Focus Levels….downgrade to positive < 1443.50 after momentum loss < 1453.50….inside range 1453.00 / 1433.00 tightens…outside range 1470 / 1411.00 for reversal
Monthly Chart Technical Stance and Focus Levels …..positive stance > 1405 but still avoiding strong positive > 1481; now on guard for a Oct lower high 1467.50 -1451.20 (to start) ….inside range 1481 / 1405 (1357) lifted….outside range 1533/ 1273
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DISCLAIMER: The information and data in the following report(s) 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. MrTopStep, its officers, directors and its contributors may. in the normal course of business, have position(s) which may or may not agree with the opinions expressed in this report.