Bulls Try to Balance a Needed Rest With More Upside

The ES roared higher last week, up almost 6%

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Our View

The bad news is back to being good news. A weak jobs number and an uptick in the employment rate fueled a rally in the ES from 4331.25 at 8:30 a.m. ET to 4383.25 at 10:00. 

It's all so mechanical, it's insane and with ~95% of the volume on the NYSE coming as some form of program trading, the markets basically go from looking horrible to skyrocketing. The S&P 500 rallied all five days last week, gaining 240 points or 5.85%. 

It just doesn't make sense, but that's how the new-world trading order works. 

As you know, we talk about the “guys with the better seats” — but who are they? They are the really big institutional firms paying billions to basically front-run the public's order flow. In conjunction with paying the exchanges billions and also being market makers, they make prices for many of the products you trade. For that, you get “free commissions.” But is it really free? No, it's not free — and nothing ever truly is. Anyone who thinks that zero commission is free doesn't understand where the prices they trade off come from. 

It is a very unlevel playing field and here is another disgusting example. It's crazy the advantage government officials have over the public. If we were in a position to take advantage of something like that, we would surely go to jail.

Earnings out this week: CEG, GILD, UBER, OXY, DVN, EBAY, DIS, BIIB, WBD

Our Lean — Danny’s Trade

This is Danny Riley’s personal trading plan for the day.

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MiM and Daily Recap

ES recap 15-min

The ES traded 4332.00 at 8:30 as the October non-farm payrolls report dropped to 150,000 — missing expectations — and traded 4359.50 on Friday's regular session open. After the open, the ES traded 4358.25, rallied up to 4383.25, then dropped down to 4366.75 at 10:11 and sold off down to 4361.50 at 10:28. After a small bump up, the ES traded down to the VWAP at 4360.25 at 10:55. After the pullback, the ES rallied up to a 4387.75 double top and then sold off down to the 4376.75 at 1:26, before slowly rallying up to the 4391.75 at 3:08. 

From there, the ES dropped down to 4384.00 at 3:26 and then fell to 4374.50 at 3:36. The ES traded 4378.50 as the MIM showed a minor $37 million to buy and traded 4375 on the 4:00 cash close. After 4:00, the ES traded up to 4380.00 and settled at 4378.50, up 42.75 points or +0.99%. 

In the end, the MTS Trading Rules 101 did not work on the jobs gap up. As I said in the lean, I prefer a gap down open, but that I would still sell the gap-up. However, the ES went straight up and I actually had a stop at 4383.25, which ended up the early high of the day. In terms of the ES's overall tone, it was firm. In terms of the ES's overall trade, volume was lower: 356k traded on Globex and 1.356 million traded on the day session for a total of 1.698 million contracts traded.  

Technical Edge

  • NYSE Breadth: 83% Upside Volume (!)

  • Nasdaq Breadth: 79% Upside Volume 

  • Advance/Decline: 83% Advance (!)

    • Back-to-back 80/80 days for A/D and NYSE Breadth

  • VIX: ~15.25

S&P 500 — ES Futures

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Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!

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