MrTopStep's Danny Riley at Big Mike's Forum Today

Today at 4:30 EST I am going to do a webinar with Big Mike’s Trading Forum. Big Mike is actually just a guy who likes to trade but got tired of signing up for a product or a chat and never hearing anyone actually say “buy” or “sell.” I contacted Big Mike after checking out his forum, and to tell you the truth I was impressed with what he’s set up. You want to ask a question? You do it through a thread.  While I have not met Big Mike personally, you can tell how important it is for people he works with to stick to what they do best and not sell people. We have always been that way. There is no hard sell at MrTopStep and there are no $5,000 products “guaranteed” to make you money. That is not how MrTopStep operates.

Like Big Mike, MrTopStep lives in a world of “put up or shut up.” Not that there isn’t any chit-chat going on in the IM Pro room during the slow times, but we have something few have — live streaming trade data. Whether you have your own tools and just want to keep up with the color and flow or if you are in there to talk buy and sell, it’s in there. MrTopStep is modeled differently from how most chat rooms operate. Yes, we concentrate on the ES, but we are also following bonds, grains, currencies, crude, gold, whatever is moving. We don’t believe in the idea that the room should have a supreme leader calling out when to buy and sell. If he’s cold for a few days the whole room is gone. So what MrTopStep offers are several educators or “specialists.” You want to talk bonds, we have Jack Broz, online live from the floor, 30 feet from the bond pit. You want ES, we have Mike V from Princeton Trader. You want crude oil? We have Henry Marcell from Stanton Analytics calling out levels all day long. If you like historical stats, we go to Jeff Hirsch from the Stock Trader’s Almanac.  If you like being connected to all the flow and noise from the floor, we provide that. Just because all the futures are electronic that doesn’t mean we do not do “size” electronic execution or do 5k S&P options in one whack, it’s all part of the flow.

We follow everything, and with so many people online we get the news fast. When the ESZ or the SPZ is hitting buy stops and running buy programs, we are calling it out. Like yesterday when crude dived $4 or last week after the Fed announcement when gold rallied $28, we are calling it out. If it trades, we follow it. I am not going to bore you with my many years on the floor or who did what and who won what battle. But tomorrow when I go on Big Mike I am going to do a great job of showing and explaining how floor traders are transitioning. Then we are going to talk program trading from someone who did thousands of programs. And lastly we will do a few of MrTopStep’s trading rules. I, like Big Mike, don’t do this for the money. I do it because I still love the floor and the game. Get it from someone who was around when Tom Baldwin made over $150mil in the bond pit, get it from someone who was in the middle of it slugging it out every day. While we were doing thousands of big S&Ps and traveling the the Arab Emirates, our competitors were still in high school. Like we have always said, if you want to fix your lawn mower, take it to a lawn mower guy. If you want to figure out what’s going on in the S&Ps, talk to me. We are the source.

MrTopStep Closing Print Video: http://www.youtube.com/watch?v=zB5uqPuBkpo

Our view:
We are starting out today’s trade with both Asia and Europe down across the board along with Spanish bond yields moving back up. According to the S&P cash study, today and tomorrow have been up 14 / down 14 of the last 28 occasions. The way we see it is the S&P needs to sell off a bit and find a good spot to back and fill before going back up. We lean to selling the rallies. The SPZ has taken out a lot of buy stops on the way up and now the downside is starting to load up with sell stops. The S&P is in need of a few down days and what better days than today and tomorrow to do it. We still have the 1430 level as a key support area. As always, keep an eye on the 10-handle rule and please use stops.

• It’s 5:30 a.m. and the ESZ is down 4.5 handles at 1449.50, crude is down 30 cents at 96.32 and the EC is trading 1.3065, down 51 ticks.
• In Asia 10 out of 11 markets closed lower.
• In Europe 11 out of 12 markets are trading lower (CAC -1.21%, DAX -1.08%)
• Today’s headline: “World Stocks Drop, Euro Falls as Spanish Yields Climb; Commodities Drop”
• Economic calendar:  Today:  Fed’s Evans speaks, current account, Treasury int’l capital, housing market index, Fed’s Lacker speaks, Ford Fusion launch; earnings from FedEx. WEDNESDAY: Weekly mortgage apps, housing starts, existing home sales, oil inventories; earnings from AutoZone, General Mills, Adobe Systems, Bed Bath & Beyond. THURSDAY: Jobless claims, Philadelphia Fed survey, leading indicators, Fed’s Kocherlakota speaks; earnings from CarMax, ConAgra, Rite Aid, Oracle. FRIDAY: Quadruple witching, Fed’s Lockhart speaks, iPhone 5 shipping date.

• VOLUME: 1.97mil ESZ and 54k SPZ traded
• SPREADS: 49k SPU/Z spreads traded
• FAIR VALUE: S&P -2, NASDAQ -4.5

S&P cash Expiration Study for September:

Monday          Up 16 / Down 12 of the last 28 occasions
Tuesday          Up 14 / Down 14 of the last 28 occasions
Wednesday     Up 14/ Down 14 of the last 28 occasions
Thursday         Up 16/ Down 12 of the last 28 occasions
Friday             Up 17/ Down 11 of the last 28 occasions

Not many people have said it, but MF Global really screwed the CME. We understand that some people may disagree, but we feel strongly that if the CME knew about what was going on they would have stopped it a long time ago. The truth of the matter is there is a strict code that clearing firms of the exchange must follow and MF Global broke all the codes of being a member of the exchange. They took client money and used it. That is a crime and people should be held accountable and sent to jail, just like the former head of Refco was.

After years of building the exchange the global credit crisis had already left its marks on the trading floors. Big and small firms alike were shutting down. No one could have known what was coming in 2007 or how long it would last, but the markets were starting to rebound. Despite weaker jobs numbers and continued credit problems in the EU, the S&P was starting to move back up. Volumes were picking up again and things on the floor were good, the CME Group had weathered the storm. Then in comes MF and Corzine using customer segregated funds to pay off bad trading bets. While many of the futures customers have gotten back most of their money, the damage has already been done. What about all the trading firms, IBs, hedge funds, investment funds that went out of business, that closed and lost millions due to all the misappropriation of funds? How is that not a crime? And what about the other $1.6bil in non-seg funds that were used for trading foreign markets or cash FX? Where did all that money go?

Last week prosecutors met with former CEO Jon Corzine and it sounds like the Feds are not going to arrest anyone, criminal charges appear unlikely. We have to ask: How can it be that one firm and its management can cause so many problems, cause such hardship and the loss of so many jobs and just be able to walk away?  Like the old saying, if you’re going to steal $1mil, take $100mil. And yes, we may be biased in supporting the CME, but the people that built this exchange did NOT build the largest exchange in the world just to have a bunch of crooks tear it and the business down.  If they had known, why where some of the top guys in the exchange clearing their business through them? In our view the CME did not deserve what MF Global did. So here we are, nearly 1 year later and no charges. The next stage is going to be the civil suits. Well, we have a story. Back 3 or 4 months ago a well-known hedge fund trader and his wife sat down to have breakfast at a well-known establishment on the East Coast. His fund had lost over $10mil at MF and guess who comes up and sits at the table next to him and his wife? Corzine and his wife.

There has been too much damage done to the exchange, the trading community and the industry as a whole for someone not go to jail, but if that is the case then we hope the exchange and its customers go directly after Corzine personally.  He knew better, he knew MF was not a Goldman Sachs, but he is directly responsible.