As I said, I am by no means even in the top 5% of people who use AI, but I think the key to AI is what you ask and how you ask it. Yesterday's study was right on. It's kind of like your wife: if you ask the right thing, you get a smile, and if you don't? Well, GRRRRR!!!!

I am not going to do a big review. What I can say is that the ES and NQ rallied on negative breadth, which goes along with what I said on my Twitter livestream: Some of the things we used to make money with don't work anymore, and market breadth sometimes falls into that category.

Market breadth measures how many individual stocks participate in a rally or selloff. It helps determine whether the market is broadly healthy or being supported by a relatively small group of large-cap stocks.

Market breadth participation data

Additional breadth indicators

Market Breadth Warning

The S&P 500 can rally even when most stocks are struggling. As of October 23, 58.3% of S&P 500 stocks were above their 50-day moving average, compared with just 33.4% of all eligible U.S. stocks — a 24.9-percentage-point gap.

Because the S&P 500 is capitalization-weighted, a handful of mega-cap stocks can push the index higher despite weak participation across the broader market.

The warning isn't that the index must decline immediately. It's that market leadership is concentrated. If the largest stocks begin to sell off before broader participation improves, the $ES could lose an important source of support.

1. Market breadth — the warning behind the rally

The October 23 data show a significant participation gap: 58.3% of S&P 500 stocks were above their 50-day moving averages, compared with just 33.4% of all eligible U.S. stocks.

The key distinction: The major indexes are showing substantially stronger participation than the broader stock market. That is a reason for caution, not proof that a selloff is imminent.

I have to admit, I don't follow market breadth as much as I should, but I know the traders in the MrTopStep ImPro room talk about it all the time. A lot of times, when the ES is up and they say breadth is weak, there tends to be a selloff more often than not. Clearly, market breadth is something everyone should have in their trading toolbox.

Correlations and Divergences

By Bosier Parsons (Quick Draw Bo)

When I clerked for Dad in the OEX pit on the CBOE, I was challenged to learn what he was watching on the big boards, while he listened to the crowd noise. What he was doing was trying to identify levels, indications, and warnings for trade entries and exits. But because I had no way of knowing where his eyes were looking, the only way for him to teach this was during very slow market conditions, when the correlations and divergences didn’t exist. Once I started watching and learning from him as a screen trader, the idea and technique became clear, as he was able to use his mouse pointer and move around his screens to show me his thoughts. Identifying correlations and divergences soon became an everyday search for me in my trading and can be an awesome tool for entering and exiting trades.

I’m not talking about unexpected news bombs – there’s no way to compete with high frequency trading machines executing on news-mining algos. I’m talking about watching as few as two markets, but as many as you prefer, to have a sense for correlation or leadership between them. I personally watch eighteen instruments (on three screens) but suggest starting out with two or three markets that you never trade in. Make these charts the same size, timeframe, and with the same indicators. Then watch them all together. You’ll notice certain days where correlations, leadership, or divergences are obvious. When these conditions exist, you can develop a keen intuitive eye and can instantly execute easy trades.

The key is to know that the correlation, whether direct or inverse, should immediately follow through in the price action. The beauty is in the speed in which you’ll know if your entry is good. If it instantly goes your way, beautiful! If it instantly goes against you, just exit with a small loss – even five or six ticks! Easy.

The most important part of this kind of trade, though, is to learn from the price action. If something has been correlated and suddenly seems broken, or reverses, do not be stubborn about getting out fast, and live for the next setup. A good mechanical system combined with correlations and/or divergences could be that extra positive influence on your trading results.

© BPTC 26 LLC

About Bo

A full-time ES futures trader based in Colorado Springs. Bo joined the Pitbull Traders family to give back to the trading community the same way his father mentored him.

Learn about Bo’s BPTC private consulting services

Globex: An Early Gap, Then a Recovery

Monday’s ES session opened at 7690.00, well above Friday’s 7659.75 settlement. Buyers briefly pushed to 7698.50 in the opening five minutes Sunday evening, but the first move did not hold. Selling took the ES down to 7651.75 during the 9:15–9:20 p.m. ET interval, giving back the opening premium and briefly undercutting Friday’s settlement.

That low became the overnight turning point. The ES recovered to 7683.50 ahead of the cash open, finishing Globex 23.75 points above Friday’s settlement despite losing 6.50 points from its own opening price. The early gap therefore told only part of the story: sellers had an opportunity to press below the prior settlement, but the market recovered before the regular session began.

The overnight range was 46.75 points, with volume of 301,549. By the time cash trading started, the immediate test was whether buyers could build on that recovery rather than repeat the opening reversal.

Cash Trade: Buyers Extend, Then Give Some Back

The ES opened regular trade at 7683.50 and dipped to 7677.00 in the opening five minutes. Buyers defended that low and drove through the overnight high. The session reached 7739.50 during the 11:00–11:05 a.m. ET interval, a 62.50-point advance from the opening low.

The market could not retain the entire morning run. By 3:50 p.m., the last-trade snapshot was 7714.50. The accompanying MOC readings showed technology-heavy selling, consistent with a defensive finish, although the imbalance alone does not establish what caused each price move. The 4:00 p.m. snapshot was 7713.25, while the final regular-session candle closed at 7714.50.

After cash trade, the ES stayed within 7711.50–7716.75 and finished the full session at 7714.50, also Monday’s official settlement. That settlement gained 54.75 points, or 0.71%, from Friday. Full-session volume was 1617347, and official cleared volume was 1791568.

The NQ also advanced, ranging from 29024.25 to 29572.00 and settling at 29437.25, up 319.50 points, or 1.10%, from Friday. Its final session trade was 29467.50. Both markets recovered, but the retreat from their highs left buyers with more work to do.

Technology Selling Sets the MOC Tone

The Reveal for the MOC on October 26 was $3.3 billion to sell. Outstanding selling then grew to $6.9 billion by 3:54 p.m., up about $0.8 billion from the Reveal, while buying slipped to $2.5 billion. That pushed the net sell imbalance to $4.4 billion. The increase on the sell side was the notable pressure change, rather than the routine reduction in unmatched dollars that followed.

Buying increased to $2.7 billion at 3:55 p.m., even as outstanding selling declined. The net sell balance subsequently narrowed to about $0.1 billion at 3:58 p.m., before finishing near $0.4 billion to sell.

The accompanying stock snapshot showed the strongest selling in technology: Micron, Tesla, and Lam Research led the sell table, with Intel, Qualcomm, and Apple also prominent. Alphabet’s two share classes led the buyers, alongside UnitedHealth and Home Depot. Those individual names describe concentration, not the market’s total flow.

Technology carried roughly $3.2 billion of net sector selling in the displayed breakdown, with financials and consumer discretionary also negative. Communication services and consumer staples provided offsets. Technology’s dollar pressure was much more one-sided than its symbol participation, pointing to concentration rather than uniformly bearish breadth.

The overall feel was defensive and technology-heavy. The late narrowing left a smaller outstanding sell balance, but did not erase the earlier increase in unmatched selling or establish a bullish price reversal.

How the NYSE and Nasdaq auctions work

How to read the MIM

Quick Draw Bo — Live in The Pit

Join Quick Draw Bo (Bosier Parsons) on Tuesday, October 27, at 9:15 a.m. ET.

Don’t trade the open alone. Join us live in The Pit for free, follow the conversation, and bring your questions.

Economic Calendar

Earnings Calendar

Polaris Trading Group

Polaris Trading Group’s Monday discussion followed a bullish Cycle Day 3 roadmap through several reported objectives, then shifted toward pullback execution and Tuesday’s next cycle. David kept the plan tied to acceptance around a central reference, while participants compared entry methods and the challenge of trusting a strategy.

Cycle Day 3 Framework

• Polaris Trading Group approached Monday, October 26, as Cycle Day 3. David cited the room’s 92.56% Positive Three-Day Cycle statistic as a bullish backdrop, while stressing that price still had to demonstrate acceptance. The statistic remained his reported historical framework, rather than a promise about Monday’s path.

• The central line in the sand was 7675, with a five-point band around it. That area separated the bullish and bearish scripts and supplied a decision reference as the room moved from its premarket plan into live trading.

Two Conditional Roadmaps

• Acceptance above the 7675 area favored the bullish sequence of 7695, 7705, and 7715. Acceptance below the same area puts 7655, 7645, and 7635 on the bearish roadmap. David presented both paths before the move, keeping the directional lean conditional on where price established itself.

• Other structural references were the prior value-area high edge at 7680, low edge at 7654, prior point of control at 7666, and the quoted Cycle Day 1 low at 7676. These belonged to the room’s own framework and should be read alongside its acceptance rules.

Morning Progression

• During the morning, David maintained a long lean while price held above the 7675 line in the sand and VWAP. His follow-up then reported the 7705 target fulfilled, followed by a next objective of 7715. A later post explicitly reported that 7715 had been tagged.

• The next milestone was the Cycle Day 3 range-high objective at 7718, which David also reported fulfilled. Those updates gave the initial bullish script a progression of stated objectives and later room observations, instead of leaving the review with only the original premarket projection.

Pullbacks and Prior-High Support

• After the upside objectives, the room marked 7705 as a pullback reference. David’s next conditional setup was straightforward: if price could hold 7705, the objective was to reclaim the prior high at 7715. That shifted attention from chasing the completed advance to evaluating the reaction at support.

• Later, he described a pullback to the 7715 prior high and said bulls needed to maintain a bid there. Failure would reopen lower levels within the prior range. The same price could therefore act as an upside destination earlier and a support test later.

Open Range and DLMB

• The room also discussed its Open Range and DLMB approaches. David reported that all DLMB levels had paid and subsequently posted an Open Range “TRIFECTA.” A participant described the session as the full DLMB experience, with another noting how directly price reached a reference and reversed.

• The conversation included a participant’s favorable view of a four-and-a-half-year DLMB study and David’s statement that it had been on a winning streak since September 23.

An Alternative Entry Trigger

• For traders uncomfortable leaving standing limit orders at DLMB levels, David offered another execution approach: wait for the first A4 shift aligned with the DLMB zone. A participant agreed that sitting with limit orders did not suit everyone and viewed the A4 trigger as a useful alternative.

• The emphasis was on choosing an execution method that the trader could actually follow. David said the room continued to provide examples, but each person had to decide which approach fit. The conversation distinguished the shared reference zone from the individual trigger used to enter.

Trust, Discipline and Risk

• A broader discussion asked whether traders distrusted the market or their own strategies. Participants described the difficulty of treating a pullback as a pullback rather than automatically assuming a reversal, and the hesitation that can arise when several timeframes are involved. Others emphasized reacting to price rather than predicting it.

• David’s execution protocol stayed consistent: take only Triple-A setups, manage dollar risk, keep hard stop-losses on the exchange, avoid chasing, and stay aligned with the dominant force. The room connected those rules to the practical problem of maintaining discipline while a move was already underway.

Tuesday’s Transition

• At the close of the discussion, David identified Tuesday as Cycle Day 1 and gave a projected average decline-potential zone of 7668–7661. He also reiterated that the Positive Three-Day Cycle statistic remained in place. The new zone was a forward reference for the next session, not a report that it had traded.

• Monday’s thread tied a conditional bullish plan to subsequent target updates, then returned to support, execution choices, and risk. The useful carryover was the sequence of decisions: establish acceptance, track the objectives and reassess the response at the next reference.

DTG Room Preview

The DTG group’s Tuesday preview centers on mega-cap technology earnings and tomorrow’s Federal Reserve decision. Its ES plan remains conditional beneath the former short-term uptrend channel and the 50-day moving average.

Market Backdrop

• The group is watching whether AI-related earnings guidance validates heavy infrastructure spending, with profitability, sustainable demand, and capital discipline more important than enthusiasm alone. It highlights Alphabet, Microsoft, and Amazon among this week’s catalysts.

• The preview discusses renewed AI optimism around Anthropic, efficiency measures at Microsoft, and caution toward speculative infrastructure providers. These form the group’s sector watchlist rather than a confirmed trading signal.

• Oil, gasoline, and Treasury yields remain cross-market checks on inflation and equity risk appetite. The group also flags an unfinished U.S.–Canada trade agreement as a source of headline risk.

Scheduled Catalysts

• The group expects attention on tomorrow’s Fed decision and guidance, with the ECB and Bank of Japan also on its radar.

• Today’s focus includes Durable Goods Orders at 8:30 a.m. ET, followed by Consumer Confidence and New Home Sales at 10:00 a.m. ET. Its broader watchlist includes housing-price releases, Richmond manufacturing, and employment updates.

• Its earnings watch includes Boeing, Coca-Cola, UPS, and other premarket reporters, followed by Visa and several technology and energy names after the bell.

ES Levels and Tactical Watch

• The group identifies 7734–7739 as the former short-term uptrend channel bottom, which held Monday’s high. Clearing it would open room toward the 7895–7900 trendline zone.

• Its potential trendline resistance zones are 7734–7739, 7895–7900, and 8042–8047; the listed support zone is 7424–7429.

• The 50-day moving average at 7759.75 remains loose resistance in the group’s plan. These room references are distinct from the BTS levels.

• The group reports no large-trader bias because overnight participation was too light to be significant. Its cited five-day average daily range is 85.0 points, versus 86.75 on Friday.

• Watch acceptance at resistance rather than assuming a breakout. Energy, geopolitical developments and policy headlines can reverse the tone quickly.