S&P 500 FUTURES: NOT A GOOD YEAR FOR MARKET TIMERS

Danny Riley
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Market timing: The ability to call tops and bottoms and buy and sell when stocks are undervalued or overvalued.
There are few jobs in the world that can be as financially rewarding or punishing as trading. You get to pick the time you buy and sell, what you want to buy or sell and the day of the week you do it. It’s one of the only jobs in the world where you’re graded every second of the day. The scorecard is your P&L (profit and loss statement). From the largest hedge funds and banks in the world all the way down to the one-lot traders, it’s all about profits and losses. At the end of the day, nothing else matters.

Learning from others
It’s true. When I met the Pit Bull for the first time he asked me one question: Do you follow the winners? Of course I said yes and he roared back “Well, that’s good because I don't want to be around anyone that follows the losers.” Maybe for some that doesn't mean very much, for MrTopStep it means everything. In today’s high-flying world of electronic trading, no one can keep up with everything going on in the marketplace. Learning what other profitable traders use is the best way to keep up. In today’s world traders must employ all the knowledge they can. At MrTopStep we believe in a “collective” of good traders that share levels and trade ideas. Years ago the Pit Bull would do hundreds of charts a night to keep up, but there are just too many other moving parts. It is a choice between sitting at your computer 15 hours a day or being part of the collective and having a life.

Market Timers
It’s not easy being a market timer. Some of the best known like Bert Dohmen, Tom DeMark, Bob Prechter, Doug Kass and others have not had an easy time of it this year. Being famous is one thing but in our world, you're only as good as your last trade. What all of the above fail to recognize is that every time they put out a sell recommendation they are purely making a guess. I do not want to say that they are uneducated guesses because we know how smart the market timers are, but my question is how can so many smart men be so WRONG? How can any of them continue trying to short the markets? And at what point does a buyer of one of the products just throw in the towel? What these market timers have not learned is one rule, you can't fight the Fed! Sure, at some point the markets will sell off, but by that time there will be no money left in the accounts. From MrTopStep to the market timers: The trend is your friend.

Doing it yourself
MrTopStep does not believe in paying for high-priced newsletters that are constantly looking to sell the markets. Today’s retail traders are a lot smarter than they used to be. They make their own decisions, have their own indicators and have no need for a subscription that is constantly selling in one of the biggest uptrends in history. How long will this bull last? As long as the Fed is printing money.

Our view: The S&P has closed higher 10 out of the last 12 sessions. Additionally, the first Tuesday of the year was down, but the last 16 have all closed higher. This morning the global stock markets closed on a 5-year high. That said, things just look too good. We lean to buying weakness in the bonds and selling rallies in the S&P. Not sure if it works but we think over the next few days it will. That doesn't mean we think the rally in the S&Ps is over, what it means is we think the S&Ps are overdone in the short term or getting close. As always, keep an eye on the 10-handle rule and please use stops.

  • It’s 7:15 a.m. and the ESM is trading 1616, up 2.5 handles; crude is down 39 cents at 95.77; and the euro is up 29 pips at 1.3110.

  • In Asia, 9 out of 11 markets closed higher (Shanghai Comp. +0.20%, Hang Seng +0.58%, Nikkei +3.55%).

  • In Europe, 12 out of 12 markets are trading higher (CAC +0.63%, DAX +0.88%)

  • Today’s headline: “Global Stocks on New 5 Year High”

  • Total volume: LOW 963k ESM and 4 SPM traded

  • Economic calendar: Redbook, 3-yr note auction and consumer credit

  • Fair value: S&P +3.80, NASDAQ +5.39

  • MrTopStep Closing Print Video: https://mr-topstep.com/index.php/multimedia/video/latest/closing-print-5-6-2013

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.
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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. 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. {jathumbnailoff}

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