Get Your Chin Straps on: S&P up 4.6% in 4 Days

There are few futures contracts, if any, that act as the S&P 500 futures do. Sure, crude oil rallies and sells off, and sure, the EC goes up and down like a yo-yo, but when you add it all up, the S&P still supplies the most “dips and rips.”

When I started in the grain room as a runner I loved the action, but when I saw the bond pit I knew right away that was where I wanted to be. After several years of working in the bonds I got an offer to work in the S&P 500 futures on the CME floor at 30 S. Wacker Drive. The Board of Trade was big and it had built the new annex and trading floor, but the upper and lower trading floors of the CME was a futures and options trader's dream come true. I want from picking up phones in the bonds to running the largest desk in the S&P on the floor. Over the next few years I added a eurodollar futures and options desk, a currency operation and a Dow desk, on top of that Brian and I had eight clerks at the S&P desk.

I knew right away this was the place to be. After high school Jimmy Carey (Charlie Carey's brother) and a buddy by the name of Brian Henry all lived together above a bar on North Avenue, just two blocks away from our partner's house. All three of us worked on the floor, so we would fight to get in the shower and then take the bus to the L train that let us off right behind the Board of Trade. We didn't care… we were going to be traders someday! Jimmy and I wrote grain orders for Rosenthal and Brian worked for Clayton of St. Louis. Jimmy's dad was a well-known grain trader and after he passed Charlie started trading in the grains. When Jimmy turned 19 he inherited his bond seat and went from making a few hundred bucks a week to filling most of the Goldman bond business. It was, as they say, game on.

CBOT Bond Pit

Brian, who worked at Goldberg doing out trades, went on to be Tom Baldwin's out trader clerk and I was still bouncing around. Jimmy was filling Corzine's bonds!

When I finally settled in, it was in the biggest and meanest futures contract in the world:  the S&P 500 futures.

S&P 500 Futures Pit

I didn't care about spreads, I didn't care about options, it was spoos, spoos, spoos. I can't explain the feeling of walking onto the floor and seeing a packed S&P pit, the noise, the smell, the testosterone was so thick  getting into a fight was a daily ritual. That's not the way it is today, but now and again things still flare up.

So why the S&P? The Pit Bull may say crude oil has taken over as the No. 1 futures contract for traders that like volatility. That may have been the case over the last few years but overall the S&P is still the No. 1 product for day traders. Last year the S&P was up over 12% going into April 2 and over the last 5 trading days has gone from a mini crash on Dec 28 (down 29 handles) to closing at the highest price since December 2007. On Dec 21 the spoos started to slide and over the next five trading days sold off 56.6 handles. Over the last 4 trading days starting Dec 31 the S&P has been up 3 days for a total 73.1 handles while at the same time the VIX dropped 40%, its largest weekly loss in 26 years.

That is why I love the S&Ps …

Friday Dec. 21 -14.7 handles
Monday Dec. 24 SPH -6.1 handles
Tuesday Dec. 25  CLOSED Christmas
Wednesday Dec. 26 SPH -6.3 handles
Thursday Dec. 27 SPH -2.8 handles
Friday Dec. 28  SPH -26.7 handles
Monday Dec. 31 SPH +36.1 handles
Tuesday Jan. 1 CLOSED New Years
Wednesday Jan. 2 SPH +37 handles
Thursday Jan. 3 SPH -3.5 handles
Friday Jan. 4 SPH +4.1 handles   

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: Gone a long way in a short time. We lean to selling the rallies early and then we may look to buy weakness. There are no scheduled economic or earnings reports today. As always, keep an eye on the 10-handle rule and don't forget to use stops.

• It's 7 a.m. and the ESH is trading 1456, down 1.75 handles; crude is down 54 cents at 92.55; and the euro is down 44 pips at 1.3036.
• In Asia, 8 out of 11 markets closed lower (Shanghai Comp +0.37%).
• In Europe, 7 out of 12 markets are trading higher (CAC -0.55%, DAX -0.45%).
• Today's headline: “Japan Plans to Add $5 billion in Stimulus”
• Economic calendar: Today: No scheduled economic releases. TUESDAY: NFIB small business optimism index, 3-yr note auction, consumer credit, International Consumer Electronics Show and earnings from Alcoa. WEDNESDAY: Weekly mortgage applications, oil inventories, 10-yr note auction and earnings from Constellation Brands, PriceSmart. THURSDAY: Jobless claims, wholesale trade, natural gas inventories, Fed's George speaks, 30-yr bond auction, Fed's Bullard speaks, Fed's balance sheet, money supply, Fed's Kocherlakota speaks and earnings from Chevron (interim report). FRIDAY: International trade, import and export prices, Fed's Plosser speaks, Treasury budget, Best Buy to report holiday sales and earnings from Wells Fargo
• Total volume: 1.5mil ESH and 7.k SPH traded
• Fair value: S&P -4, NASDAQ -8
• MrTopStep Closing Print Video: https://www.mr-topstep.com/index.php/multimedia/video/latest/closing-print-1-4-2012

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