Investors eyeing pullback in choppy, low-volume markets

Our View, Stocks

ES 03-14 (1 Min)  2_25_2014Chicago CME Group – The S&P 500 futures closed modestly higher Tuesday while the Dow Jones [DJI:^DJI ] and the Nasdaq Composite [CME:NQH14} closed down 27.48 and 5.38 points, respectively. As of yesterday’s close the S&P [CME:ESH14] has closed higher 14 out of the last 17 trading days in February.

Despite another round of weaker-than-expected economic numbers, the indices rallied in the first part of the day, selling off late as a big sell imbalance showed up on the MiM.

Up and down and all around

The economic numbers keep coming in weak and traders keep saying it has to do with the weather. What we know is when the weather got bad in January into February, there was a big spike in the VIX , a big sell off in the ESH and increased volume.

Then the S&P started going up and the volume disappeared. But over the last few days the big ranges are starting to return and volume has picked up a bit. Yesterday’s trade in the S&P was up and down and all around but that’s what futures traders want.

Markets changing, traders need better tools

Trading the S&P without the proper tools or indicators is like going to a gunfight with a butter knife. As more algorithms move away from the stock markets and flood into the futures markets, it’s more important than ever to have proper tools and know how to use them. One tool that is unique to MrTopStep is the MiM. No one has it but us. Is it right everyday? That depends on how you use it…

The MiM

MiM Feb 25 2014There are few if any tools that give the small investor what the MiM has to offer. If you say it “doesn’t work” you have no idea what it is, to put it bluntly. You have to know what the tool does and how to use it. Otherwise, it’s like you’re watching a microwave oven and saying, “This is the worst TV show I’ve ever seen.”

The MrTopStep Imbalance Meter (MiM) give traders an early indication of buys or sells on the close. It’s very important to remember that the data is only from 3:00 to 3:45 ET and NOT the last 15 minutes or 4:00 cash close. That data is already public. The MiM tells you what the exchange does not.

It’s also important to know that a big buyer or seller in the cash market can show up less than a 10th of a second before the actual “cash close” at 4:00 ET.

A lot of traders like to trade the close and more are learning that trading the close can be a lucrative and straightforward way to end the day—if you do it right. The MiM is the prefered product for trading the close. In fact, it is the only product.

Other traders use the MiM to plan their exits and avoid getting a nasty surprise at the end of the session. The MiM should be part of every trader’s toolbox.

The Asian markets closed modestly higher lower and Europe is trading modestly lower. Today’s economic schedule starts with MBA Purchase Application, New Home Sales, API Boston Federal Reserve Bank President Eric Rosengren speech on the economic outlook in Boston, Cleveland Federal Reserve Bank President Sandra Pianalto speech on the history of the Fed, in Wooster, Ohio and Earnings pre-market: [AES], [ANF], [ARCC], [BKS], [CHK], [CRI], [CVC], [DIN], [DLTR], [LB], [LOW], Royal Bank of Canada, [TASR], [TGT], [TJX], [USM]. Wednesday post close: [ADSK], [AGO], [ARI], [BIDU], [CLR], [JCP], [TIVO], [VALE], [WDAY], [WLL].

We think it’s going to be a big day. The S&P is churning again and when it does that it usually means it’s about to start moving again.

The Big Chill

Picture by skisnowstar.com

It’s 4:00 am CT and it’s -25 degrees out with the wind chill factor. 80% of the Great Lakes are frozen over and the Windy City is expecting 3 snowstorms in the next week with “extremely” cold weather.

It’s hard to believe that the polar vortex in not affecting business across the United States. California, which produces 50% of nuts, fruits, and vegetables in the US has been wiped out by severe drought.

Prices for everything will be going up. Cattle ranchers are dumping livestock because they have no water or feed. You have to wonder how this is going to play out.

This morning there are some numbers to get past and some Fed speak a little later. Tomorrow Janet Yellen will be in Washington for her Congressional testimony. Will the S&P rally again as she speaks? There is little doubt that the Fed is going to have to warm up the printing presses for the Ukraine but now Russia is threatening its borders.

Our view is  higher but there are a lot of outside factors this morning. The key is not to to try and predict the direction, but be ready to turn with the market as it chops up and down. You take it from there…

As always, keep an eye on the 10-handle rule and please use protective stops when trading futures and options.

  • In Asia, 7 of 11 markets closed higher : Shanghai Comp. +0.35% , Hang Seng +0.54%, Nikkei -0.54%
  • In Europe 8 of 11 markets are trading lower: DAX -0.26% , FTSE -0.29%
  • Morning headline: “ Russia President Putin reported orders western and central military districts to test combat readiness of troops”
  • Total volume: 1.56Mil ESH14 and 5.5K SPH14 contracts traded
  • S&P Fair Value:1842.72(futures 5.78 higher at 1848.5 as of 8:09 AM ET)
  • Economic calendar: MBA Purchase Application, New Home Sales, API, Eric Rosengren speaks, 5Yr-Note Auction and Sandra Pianalto speaks.
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