MrTopStep’s Index Futures Recap

"markets", Charts, Commentary, Market Recap

Day 3 Of The Yuan Devaluation & The Late Friday RIP

Last night the S&P futures (ESU15:CME) shrugged off the latest round of Yuan currency devaluation as traders have either seemed to adapt to or are no longer concerned with Chinese monetary policy. The ESU5 traded up to 2085.25 overnight before coming off during the Euro session back down to the 2073.25 before opening the regular session at 2077.75 and after failing to take out the globex high or low during the early part of the session appeared to be in a low volume grind and chop before the “late Friday RIP” (explained below) began to take the market higher up to the 2089.75 area before closing at 2089.25

Going into next week the economic calendar is again light and with just two full weeks before the summer holiday officially ends with Labor Day we expect that today’s low volume just barely trading over one million may be an indicator of the upcoming days as we could see  a thin-to-win type grind higher. Monthly option expiration weeks have been particularly kind to the S&P 500 (^GSPC:SNP) as it’s closed higher 14 of the last 18 expiration weeks, and the mid month calendar is the least volatile of the month.

The Late-Friday “Rip”

We’ve written often about the Friday Effect, including this description: The Friday Effect is something MrTopStep noticed earlier in the year and it happened again on Friday’s close. It doesn’t matter if the S&P is up or down on the day, whether the S&P is shortcovering into the close or it’s doing just like on Friday, chopping higher. What I have noticed over several weeks was the S&P futures just taking off to the upside going into the 3:00 PM CT cash close. I don’t know enough about why it happens, but I think it has to do with the late-day futures flow rather than the actual cash market. The Friday Rip is the fast, dramatic move that happens on Friday afternoon near the close. It is generally to the upside, but sometimes involves a sell-off. The MiM often shows a strong signal in one direction. If the market hasn’t yet fulfilled the move the MiM is predicting, there’s a good chance it will wait until almost the last possible minute and then RIP! hit every buy or sell stop and run. All of which is to say, “Beware.” Do not leave a trade unattended just because it’s Friday and the market has slowed down and there is very little volume. Remember the thin-to-win rule. Traders can more easily push a thinly traded market around and buy and sell programs often are programmed to take advantage of such opportunities. Even if you’re leaving a trade on over the weekend, make sure your stops are placed such that you don’t get stopped out by a dramatic rip in a way that you hadn’t planned. Either stay on the market or be prepared for a big fluctuation in price. What causes the rip? It could be a combination of factors: traders closing out positions they don’t want to carry into the Sunday electronic session, a Friday in which funds must adjust their books and want to take on positions they want to report and get out of positions they don’t want to show. Traders have noticed for decades that what happens on Friday near the close tends to continue on Sunday evening and into Monday.

Seen In The MrTopStep IM Pro Room Today:

Dboy1 ( 2:50:44 PM ): I think we go up into 3;45 and down a little after

Tomorrow’s Notable Earnings: Estee Lauder Companies Inc (EL) Urban Outfitters Inc (URBN)

Tomorrow’s Economic Calendar:

3-Yr Note Settlement

10-Yr Note Settlement

30-Yr Bond Settlement

Empire State Mfg Survey 8:30 AM ET

Housing Market Index 10:00 AM ET

E-Commerce Retail Sales 10:00 AM ET

4-Week Bill Announcement 11:00 AM ET

3-Month Bill Auction 11:30 AM ET

6-Month Bill Auction 11:30 AM ET

Treasury International Capital 4:00 PM ET

<ul>

<li>Open: 2077.75     </li>

<li>High  2089.00  </li>

<li>Low:   2076.00  </li>

<li>Close: 2080.50    </li>

<li>Volume: 1,061,544 total  </li>

<li>MOC: 320 Million to Buy   </li>

</ul>

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