Emini Futures Trading Report- 08Feb2018


Hello Folks, the S&P500 Emini futures at 2597.25
Today’s Range: 2577.75 – 2686.50

The futures did not reach 2660 after hitting our stop at 2650 in the
morning, though they crossed 2650 a couple of times, and then went down to
2600 after 2650 level failed. Therefore, our 2660 limit buy order did not
execute, and our futures long position did not re-establish today.
Currently we are on the sidelines, and will get back on board at 2660.
The upside targets are 2750, 2780, 2800 and they may come by end Feb.

Market Notes:

1. We have taken stop losses this month, and we have to recover them, and
we will do it. This is not the first time the market is falling, and we
have come out successfully from similar situation in Jan-Feb 2016. The
corrections of 2017 were minor compared to this one in Feb 2018.

2. There were multiple reasons for our choice of 2650 stop. It was a
support in that past, from which the rally took off. And on the hourly
chart, there is a head and shoulder formation, with neck line at 2650, so
below 2650, a quick fall was visible, which played out today.

3. It maybe difficult to believe looking today’s fall, but my analysis is
that the fall is over, and today was a follow up test of support levels,
to ensure all lower levels get tested in one shot. The same could have
been done at 2650, but the futures wanted to test lower like 2580. The
futures might fall further till 2550 briefly and bounce back from there.
Few months back, 2580 was a strong resistance and then it became a strong
support. I am confident 2580 will hold, and futures will bounce back up.

4. The S&P500 is falling more on lack of buyers than on selling pressure.
I believe the large funds managers are busy deciding at what level they
want to buy. This market is still a buy on dips market, the current fall
is setting the stage for next rally.

5. Similar falls of this type in the previous 5 years have taken 3-5 weeks
to build the base for the next upmove. It doesn’t look like the futures
will close above 2700 this week. Therefore, new highs of 2900+ may come
only in March or April, because it will take the futures 2-3 weeks to
build the base before moving up again. However, 2750 and 2800 are still
our targets for end Feb 2018.

6. There has been record high leverage in the market due to less
volatility and relatively good gains in year 2017. Some of those leveraged
positions will get cut in this fall, which will make the market stronger.

7. A couple of traders/investors asked me if this was a rewind of 2008
fall, which started in Jan 2018, and went on crushing prices lower till
year end. My analysis is that we are not at all in 2008 kind of scenario,
which came after 4-5 years of economic growth worldwide, and recession
data points were already visible on the dashboard. We don’t have such a
condition today, and global economic growth is just starting to picking
up, still weak in many places. We can expect new highs in S&P500 this
year, in the coming weeks and months. Thanks.

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