TRADE OR FADE

When I started on the trading floor years ago, I knew I wanted to be a trader. In all honesty, I was completely and totally enamored with the trading floor. All the yelling and pushing and making big bucks at the same time. It was like fighting, but you couldn't punch the other guy, you just had to be smarter and be a better trader.

When I say Brian Shepard and I have seen it all, we really have. It's not very often that a couple of small-time guys can show up at $10 and $20bil hedge funds, or sitting in Abu Dhabi in the world's largest investment firm, ADIA, or sitting with the princess of Thailand during the Thai baht currency crisis, or sitting in a bank in Luxembourg — we have been there and done it all. At the end of the day people like “floor guys,” especially ones that have made it over a long period of time. I have been on the floor since 1979 and Brian and I have been together since 1986. That's a lot of time on the floor. When I say we have seen everything, we really have — we had a bond desk, a Dow desk, an S&P desk, a currencies desk and a eurodollar desk. It really has been an amazing run. But things have changed and most floor traders do not make the millions they used to. The days of locals stepping into the S&P pit and thinking they can muscle their way to making big money have been gone for years. The S&P pit just happens to be one futures pit that the locals actually come to trade in still. Most of the other futures pits are pretty much empty with the exceptions of the opens and closes. The S&P pit, on the other hand, still has 50 or 60 locals, and during the rollover there are usually 100 locals and order fillers in the pit, so it's not completely dead. What's dead are the days of buying and selling thousands of big S&Ps and big locals like MSLO making millions in one day. Sure, he can get in there and grind out $15 or $20k in the morning if he catches it right, but he knows he can just as easily get smoked.

Joey B offering in the S&P pit

Last week LBJ (Joey B) took a header again. They say he lost a bunch of cash and no one knows if he is coming back. It's hard to give up on something you love and have spent so much time doing, but the days of making big bucks standing in the futures pits are gone.

Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.

Our view:
The S&P has been up 5 out of the last 6 trading days. European finance chiefs have agreed to a deal on aid for Greece. They say it's an expensive Band-Aid that will at least stop the bleeding for now. Here is how we see it: The S&P can't keep going straight up; it needs a period of back and filling before it starts going up again. 1420 and 1430 are critical resistance areas right now. This morning we have a barrage of Fed speak and economic releases. That said, we lean to selling the rallies. As always, keep an eye on the 10-handle rule and please use stops.

Today's data:

• It's 7:00 a.m. and the SPZ is up 0.7 handles at 1404, crude is up 26 cents at 88.00 and the EC is flat at 1.2965.
• In Asia 6 out of 11 markets closed higher (Shanghai Comp. -1.30%, Hang Seng -0.08%).
• In Europe 10 out of 12 markets are trading higher (CAC +0.41%, DAX +0.43%).
• Today's headline: “European Stocks Rally on Greek Aid Deal.”
• Economic calendar: Today: Dallas Fed president Richard Fisher speaks, Atlanta Fed president Dennis Lockhart speaks, durable goods orders, Fed Chairman Ben Bernanke speaks,  Redbook, S&P Case-Shiller HPI, consumer confidence, FHFA house prices, Richmond Fed Mfg. Index. Wednesday: Bank Reserve Settlement, Cleveland Fed's Sandra Pianalto speaks, MBA purchase applications, new home sales, API, Fed governor Daniel Tarullo speaks, 2 yr note auction, Beige Book.
• Globex volume: 1.2mil ESZ and 5.6k SPZ trade
• Fair value: S&P -0.25, NASDAQ +1.25

MrTopStep Closing Print Video: http://www.mrtopstep.com/videos/?id=34909

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