Yield'ing Right Of Way

By Mr. TopStep
Benzinga Contributor
November 16, 2011 2:25 AM

Symbols: LOW, S

Posted in: Commodities, Global, Markets, Trading Ideas

THE MID-MONTH BUMP

The markets always follow a pattern. Some of those names are seasonal, historical, technical and fundamental. But the easiest pattern to follow is the “mid month reinvestment of dividends” one back into the stock market. Other times to watch are the last 3 days and first 3 days of the month when the mutual funds buy and sell winners and losers. While we follow a lot of technical support and resistance, we also feel that we cannot over look things like T+3 and the mid & month end buying. Look, in the past a guy could get up; do a little buying and selling and call it a day. It's not that way anymore and the more tools in your trading tool box the better off you are. As we have said for year that we live in an ever changing environment and that nothing stays the same. Thus today's good trader (not the algo guys) don't just use one thing, they use several.

After years of following the markets, there are some very good tools for picking highs and lows; but that job requires more than one skill set. Meaning there is no one full proof tool. That said the MTS instant message allows traders to see a variance of tools that other traders use. It is also a place where you can get a feel for the flow and the news other traders are following.

It's 6:00 am and the SPZ is down 10.5 handles at 1243.70, crude is trading 99.03, the EC is down 70 at 134.72 and gold is 1776.60 last. In Asia 10 out of 11 markets closed lower (Heng Seng down 2%) In Europe 9 out of 13 markets are trading lower. The main headline out this morning is “European Central Bank Steps In to Counter Bond Rout” We have another big day for economic reports and earnings reports this morning and it start with the weekly mortgage apps, CPI, industrial production, housing market index, the oil inventories, Richmond Federal Reserve Bank President Jeffrey Lacker on a panel discussing the Fed and allocation of credit at the Cato Institute annual conference in Washington at 10:15 and Boston Federal Reserve Bank President Eric Rosengren speaks at the Boston Economic Club at 11:45 and earnings from Abercrombie & Fitch,, Applied Materials, Limited Brands, NetApp and Target.

Our view? Let the SPZ fall and find a good place to be a buyer. We are sure there will be a two way trade but we still think up. Remember to keep an eye on the 10 handle rule and always use stops!

VOLUME 15k SPZs and mil 2.24mil ESZs traded (LOW)
SPREADS: 1.3k k SPZ/H and 50 SPZ/M spreads traded
FV: S&P, NASDAQ

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YIELD'ING RIGHT OF WAY

With bond yields soaring in the Euro Zone again…and again yesterday due to continued / unconfirmed concerns of sovereign downgrades, the overseas markets gave up early gains. Global equities were hit as the appetite for risk is only bite size pieces. Yesterday, it was risk off and flight to quality that set the early tone. However, US equities did not turn out as badly as they looked in the early hour's yesterday morning. Monday nights' Globex session traded from 1254.75 down to 1234.00. Hmmm… 20 handle trading range and were 18 handles lower at 6:00am before popping to open 6.5 handles lower on the RTH bell. Yesterday mornings' US economic numbers came in a little better than expected continuing the recent trend of slightly better US economic data. The all important health of the US consumer continued to show small gains in retail sales for the 5th month in a row and gave the bulls a little something to cheer about.

We could do all our usual highs, lows and times, but you know what? We are stuck in the same range trade. We could condense this section of the previous days review by just posting/looking at a chart along with one small paragraph… but we can't help ourselves. Tuesday's trade started with 492k ESZs and 2.1k SPZs traded in GLOBEX, a batch of good economic news and a 6.5 handle lower RTH opening range of 1246.50 to 1245.70. The SPZ sold off to 1242.00 LOD, rallied up to a new high at 1253.00 and sold off again. During the consolidation, the SPZ held the 1244 area a few times and basically went from doing small sell programs to doing much larger buy programs and running a bunch of buy stops. Parts of the day were choppy as the cross currents ran their course and/or until the European markets closed…That is when the risk on trade came back to shine as the portfolio managers put mid-month money to work. “PIT BULL” (12:44:15 PM): mid month reinvestment of dividends not to be denied…The bonds backed off their highs and the equities stepped higher after a little “back and fill”. The SPZ took out the 1253.00 high, made several new highs and was trading 1259.00 at 12:40CT, then on to the HOD 1262.00 at 2:30CT. The cash imbalance showed $250M to the sell side, 1255.70 traded on the cash close before settling at 1254.10.

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ECONOMIC CALENDAR: http://mrtopstep.com/economic-calendar

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CONTRIBUTORS' CORNER

SPX CHARTS ~ BreakOut? Bill Blount, Tepid2

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MTS NEWS & OBSERVATIONS:
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HEARD ON THE MTS IM:

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eubie (06:39:39 AM): I like the 1237/38 (GLOBEX) area long where the wedge is “Higher Lows / Lower Highs” / resolution will come quick / with a 1225 print anywhere / the “UPSIDE” party look over
eubie (06:57:45 AM): if you guy like GAP FILLS / try one 1238 long / legg in legg out
MTS DESK (08:34:21 AM): opening range 1246.50-1245.70 / 492k ESZ and 2.1k SPZ traded on Globex, trading range 1254.75 – 1234.00
MTS DESK (08:37:31 AM): 10 HANDLE RULE / GLOBEX
william (09:34:33 AM): momo low the way I measure = 12:23 yesterday — bulls trying hard to get the job done — 53 needs converted
eubie (10:33:54 AM): this is opening up to the 1241 area / pocket ACES / hold on / STOPS coming
peter (10:46:49 AM): your a great mentor Eubie!!!!!!!!
eubie (10:56:27 AM): PINCH coming / 2 min away 1243
eubie (10:59:11 AM):
george (11:00:46 PM): dang eubie that one happened so fast
brad (11:04:00 PM): that was beautiful eubie! +4.25 and one runner left
eubie (11:35:34 PM): Bollinger OFF screen / cannot see THEM 1256++
MTS DESK (11:43:31 PM): nice buy program huh? get everyone short 1244 hold and its a buy stops and buy programs / looks like the SPZ is “back and filling” right now there ate 40 locals in the outrights and 15 in the S&P spread SPZ/H is -600@-595 2k by 1k all day the -600s trade 10 xxx and the -595s trade 860 / we think they have showed you their hand / buy stops 1256.00 small larger above 1258.60 up to 1263.00 which is where we think we are going / say hello to the Mid month re balance / total volume in the ESZ is 1.47mil (include GLOBEX) with 4.5k SPZs traded *860 from the spd) total S&P options volume is 12k / 7k calls and 7k puts
stanton analytics (12:39:10 PM): don't know if it gets there, but we are selling 100.45 with a stop above 100.60.
william (01:03:09 PM): ball game is now all about 1253 and 1268
james (02:28:02 PM): Eubie thanks for a great day of hitting doubles!!!, not outs (stops) started with that 1238 this am Thanks to all contributors for all the hard work to make MTS rock and roll. eubie (02:30:17 PM): if the “3″s rule works / the 1262.50/63 area scalp short / working against the clock / sharpening the BuzzSaw / 1262 / meaning that the 62.50′s is it / trip & fall / so far that 1262.00 NO GOOD
michael (02:58:37 PM): +5 from the 3′s….i'm 4 hours in this fantastic room and made the whole subscription for a year of MTS…amazing!
brad (03:00:49 PM): great day again eubie! thanks to the MTS flight crew for another profitable trip!

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Originally posted here.