The ES rallied late Thursday, and continued to rally on Globex all the way up to 2585.75, before dumping down to 2571.50 at 4:00 am. On Friday mornings 8:30 CT futures open, the ES rallied back up to 2577.50, pulled back to 2575.25, rallied above the vwap to 2579.25, and then in came a few small sell programs that pushed the ES back down to 2573.50 at 9:00 am. Once the sell programs dried up, in came a few buy programs that pushed the ES back up above the vwap to 2579.00. The next move was down to 2573.00, and then back up to a double top at 2577.75.
Like the title says, the Friday’s trade was a choppy mess. After trading back up, the ES sold off back down to 2574.50, and then popped up to 2579.25. From there, the ES moved back down under the vwap to 2575.75, and then up to a lower high at 2578.75. After another drop under the vwap, the futures started moving back up again. Just after 2:00 CT the ES traded 2581.75. After a little bump and grind, it pulled back a few handles and ‘triple topped’ at 2581.75, not far off from where I said the it was going to go, the 2581-2583 level.
Some traders commented that the rally was not that firm, but I would say the exact opposite about the early sell off. There was much more punch on the upside than downside. There is no doubt the markets are being overshadowed by the tax reform package, and there is good reason for it. Will the government come to an understanding? Will the tax reform bill be put off until 2018? There are a lot of question marks, but I do not think it’s going to be a trend changing event. Cyrus, the former head of prop trading at Goldman, put this out in the forum:
Cyrus – “A question posed at this conference was what happens to the markets if tax reform or tax cuts are delayed or derailed? It matters not. Ronald Reagan cut top personal marginal rates from 70% to 50% in 1981, and that act did not prevent Mother Nature from taking hold. A five-quarter recession and equity bear market started that summer, at the hand of the Federal Reserve, and this time is no different.”
Everyone has their own view of the markets, and it seems to me that there has been a slight push to the negative side. The big concern overshadowing the markets right now is the tax reform bill. I think a bill will get passed, but it may take a little longer, and it might not be the exact one the republicans are pushing. As I have always said, the S&P hates uncertainty.