Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day
Good Morning Traders!
One of the many lamentations of floor traders in the process of extinction are the algorithmic programs controlling 70% of day trading. “It ain’t like it was,” is the common theme. Case in point yesterday’s dramatic reversal of ES (thanks to crude of course).
If you have read Rooster Call with any regularity, you remember the importance of the 2025 area. So we were trading ES in the live room and 2025 was hit. Rather than simply take profits, the mind thinks…”wow, this ES is ready to fall!” Of course 2025 held.
Later in the morning we saw the low of 2022.50 hit. We stopped trading shortly after 11:30AM, as is our practice. Two ES trades, one paid for commission and the other bought dinner for two. Nothing special. The better trades were crude, gold, and TF. An exceptional day for trading after a very tough Wednesday morning.
Crude rose off a bench mark so equity index futures rose as they are joined at the hip with the odd-day de-coupling.
Now getting back to Thursday’s action. The large hands have engineered an attempt at reversal price bar. Once again, any move over 2040 is bullish implying a move touching 2050, then 2062. Downside action lines are 2040, 2030, 2025, and beloved 2012.
Nothing has changed with global fundamentals…oh, wait a minute…yes…we have no reason to think second quarter earnings will be better than first, even though the financial press has promoted the idea the earnings recession is over.
Deere, the largest maker of agricultural equipment cut full year guidance for the second time this year. Interestingly, Reuters does not place this on front page. Too negative to draw attention? Add Deere to the list of cautious forward guidance by US firms.
In other news…
Taiwan export orders fall 11.1% in April. Taiwan a major exporter.
German producer prices reported falling for the 33rd consecutive month.
Japanese retail sales reported falling 3.8% in April.
Lipper reports investors pulled $3.9 billion from US based stock funds week ending May 18. Year to date, $45 billion removed from US stocks.
The USA slapped Chinese steel duties of over 500% to stop dumping. The Chinese simply have too much output and not enough customers. The steel mills are part of the modern rice bowl…employment.
The next BIG stock market surge…if I had to guess…is IF Britain stays in the European Union. Beyond this…there simply is nothing of a fundamental nature supporting present ES levels. Thank goodness we have the crash trades working.
Yesterday, a man who matters spoke on the FED potential rate increase. This man is William Dudley of the New York FED. He reinforced the idea a rate increase could occur in June or July…data dependent. Let’s assume July since the Brexit vote occurs a week after FOMC. The FED may wait to see the fall-out. Both Euro and Pound could knee-jerk lower if the referendum passes. A bleed into equity index futures would then likely occur.
I would view any rise in ES with suspicion. No doubt the professionals will operate off the idea of “sell strength.” Be careful. Yesterday’s reversal is designed to entrap in my opinion. Obviously, I could be wrong.
Today is Friday. In a down trend, we always monitor Euro for selling short if provided a trading signal during the last hour of European trading. After 11:30AM ET this window closes.
10:00 Existing Home Sales
1:00 PM Baker-Hughes Rig Count
Thursday reversal bar and today we see USA equity indexes in the green as a scripted event unfolds.
VIX lower, yet elevated for the week.
Crude lower after making move higher.
Natural gas inventory report helps engineer reversal as price dipped below 2.00.
The pause in US dollar paves the way for a higher Euro since these two move in see-saw fashion.
Gold incrementally higher after yesterday’s test of our 1253 cardinal line. A move above 1253 bullish…below bearish. Silver capitulates on Thursday. Both Silver and Gold break market structure pattern suggesting lower prices ahead.
All industrial metals are incrementally higher based on US dollar incrementally lower.
Corn served up a whack day yesterday amidst the risk-off confusion. Note the Soybean daily chart price bar looks exactly like yesterday’s ES reversal price bar. Today Soybeans higher in follow-through action, just like ES. Coincidence? I don’t think so.
Coffee also served up a large whack the way coffee is known to do. We have a saying at Hit the Mark Trading…parabolic moves typically end in tears. Same thing occurred with yesterday’s whack in Wheat.
Sugar nearing a break out point with wedge.
Bonds remain supported regardless of the Wednesday knee-jerk.
Yen lower. G7 meets discussing monetary issues.
Aussie stages reversal price bar on Thursday with incremental follow-through today.
Canadian dollar nothing special. Market structure top triggered this week thus lower price in the futures.
Think About This!
The week ends with options expiration. Typically professionals were known to raise equity indexes on this day more often than not as an old trader rule of thumb.
Have a great trading day!
To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.