THE MRTOPSTEP I.M. AS A TRADING TOOL

Everyone should do their due diligence. Trading is not for everyone. Like walking across a busy street, you have to look both ways. In today’s high-speed trading environment, one mistake can cost you the day, the month or your entire trading account. Sure, anyone can throw out a level to buy or sell, but putting it into action is the only thing that counts.

After working with hundreds of professional traders and trading firms, I am 100% convinced that just watching CNBC and sitting on your futures trading platform is not enough. Times have changed and the days of walking into the S&P pit and losing $50G and making it back just do not happen anymore. For one thing, the markets are tighter and there is no edge, but the other part is the overall risk of the markets in general. Today’s traders need to employ all the tools they can to produce profits.

The days of floor traders making a million in a day are gone. Today’s S&P pit locals don’t think that way. Yes, they could stay home or go to an office and trade, but why should they when they can go into the S&P pit and have every quote board in the world staring them in the face? The energy of the floor, the noise, the thrill of victory and the agony of defeat are all part of the trading floor and you just do not get that in your basement at home. In the old days when the markets were flailing around, all I had to do was pick up a line to get a trader buy or sell hundreds of S&Ps. The big hedge funds don’t do it anymore and nor do the locals. They do not trade as much or as often. Yesterday I was talking to GME, a local in the pit. I asked him how he was doing and he said he was doing OK. He said he was making money and that if he makes his 50 ticks he quits for the day. He said the game has changed, he is not in there “bidding 1415.50 and offering 1415.80’s,” that you have to have a game plan. He said it took a while but he has learned to trade levels and that he is much more patient. Well, guess what? A lot of the things GME said have been exactly what the MrTopStep chat talks about every day. GME has been reading the MrTopStep morning reports for several years, and while we cannot say we are part of his success, we can say we think he listens to what we write.

In the past I always thought the pit was the best place to go if you wanted to trade the S&P. Even today I still think it is important, but as the MrTopStep chat grows, I now think the room has taken over. I get more out of watching the flow in the room than I do paying attention to the locals and the small amount of paper in the pit. For reading the tape, I still like the CME boards, but I also know that is not going to last forever. After all the years of trading I know of no other place a trader can go and be so connected to other great traders …

Our view:
The S&P has had a good run and has tested its April 2 high and sold off. It is our guess we could see some more weakness today, but we have to get past the economic reports first. What we can say for sure is that the ESU and the SPU took out the last of a long line of buy stops up to the highs yesterday and now the downside is loaded with sell stops. Ideally we want to get to the floor and get a look at the price action. As always, keep an eye on the 10-handle rule and please use protective stops when trading.

• It’s 6:00 a.m. and the ESU is down 3 handles, crude is down 15 cents at 96.69 and the EC is trading 1.2470, unchanged on the day.
• In Asia 9 out of 11 markets closed lower (Shanghai Comp. -0.50%, Hang Seng -1.06%).
• In Europe 10 out of 12 markets are trading lower (CAC -0.94%, DAX -0.92%).
• Today’s headline:  “Asia Down on Japan Data As Greek Meeting Looms.”
• Economic calendar: We have an extremely light economic calendar this week. Today: Weekly mortgage apps, existing home sales, oil inventories, FOMC minutes; earnings from H-P. Thursday: Jobless claims, PMI manufacturing index flash, new home sales, FHFA home price index; earnings from Gold Fields, Hormel Foods. Friday: Durable goods orders, USDA food prices outlook

• VOLUME (LOW): 1.73mil ESU and 12k SPU traded
• SPREADS:  6k SPU/Z spreads traded
• FAIR VALUE: S&P -2.00,  Nasdaq -4.00

MrTopStep Closing Print Video: http://www.mrtopstep.com/videos/?id=25231

Tuesday’s S&P 500 futures wrap-up:
The Spanish auction goes off without a hitch, but US chain store sales disappoint as the back to school buying may have been curtailed by recent spike in prices paid at the pump and waiting for Labor Day holiday sales. The economic calendar and macro news picks up starting tonight in the Eurozone. Premarket the Euribor futures were sharply lower in the early trade, with market sources saying it was down due to the ECB yield cap story and some taking off positions as curve looked overbought. Also, euribors following Eonia curve steeper as market prices in a 16% chance of a 25bps ECB rate cut in 1-years time, down from a 26% of a 25bps rate cut at close of business on Friday.

Tuesday started with 200k ESU and 800 SPU traded on Globex, trading range 1414.20– 1419.90/ Monday’s range 1416.20 – 1409.70, settled 1414.70 down .5 handles. The SP cash opened above it’s highest closing level since 2008 as the RTH’s gapped 4 handles higher to 1419.00 – 14.18.50 S&P 500 marking the early low before trading 1420.70, then retesting the opening range and popped. EUBIE (08:44:25): APRIL 2, 2012 SPY highs were $142.21 / today’s $142.73 / BE ON REVERSAL ALERT / anywhere 1420 / I WOULDN’T BE LONG ANYWHERE NEAR THIS TEST.  The 1420 to 1425 area has been an upside objective for the bulls for weeks and now they tagged it! So, now what? EUBIE (09:05:23): try a legg short 1422.50+ / using the “3′S rule SWING SHORT or scalp them back to “00″ / risk 3 handles to make 10 – the spoos traded 1424.60 HOD. Lockhart says Fed weighing all options regarding easing, asset purchases remain an option with scheduled Eurozone meetings on tap. Let the games, coordination begin! We are looking for some profit taking as the FOMC, PMI (the economic calendar) and anticipated Eurozone headlines hit the tape as discussed on the morning video (link below). EUBIE (10:18:05): TLT lows $120.79 / SPU’s 1423 Widest ALLDAY / Pick UR POISON. By 10:25CT the equities lost the bid and back and filled over the next twenty minutes to 1417.70, 1417.00 at 11:20 before the sideways to lower trade set in as the juggernaut called AAPL, the Nasdaq floated back to close the mornings gap and then some, as a midday sell program greased the back and fill. Oddly, the treasuries were back off the mat, but were only modestly higher. Can you say twelve handles from the RTH’s HOD by 1:00? We can – Whoa! william_blount (13:02:47): 1415 is now minor resistance due to dropping out of wedge by more than NOISE of 1.25 — bulls are probably staring 1398-1408 in the face before HOLLANDE MERKEL if they don’t get back thru that 1415 and hold it — they get thru 1419 and this was just mini swoon. 1411.50 traded at 1:44, the treasuries added marginally to the plus side as the next leg took the spoos down to 1408.20 LOD, down 6.5 handles while the nazzy was off almost 14 handles. 1411 area was trading when the closing imbalance were mixed showing 21 of the Dow 30 for sale and the broader market showed $150M to buy. 1411.50 traded on the cash close before settling at 1412.50 down 2.2 handles. EUBIE  guess what? TODAY IS A NEGATIVE OUTSIDE DAY / NEW HIGHS 1424.75 TAKING OUT YEST LOWS 1409.70 // MARK UR CHARTS // ‘TREND A CHANGING’

MTS video: http://www.mrtopstep.com/2012/08/8-21-2012-brian-shepard/

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