It was just one of those days… Today was an options expiration day and a day leading into a 3 day weekend. The pre-market NY Mfg Survey and Capacity Utilization beat expectations while Industrial Production slipped a little. The ES reacted favorable and climbed within a point of the 1522 all-time high before the cash market opened. All eyes were on the 9:55am EST Consumer Sentiment report. As I posted in chat, a good report and the markets could blast through the all time highs and create an up trend day. A mediocre report, then maybe some downward pressure, but most likely grinding then resumption of the uptrend. A short order flow opportunity unfolded 10 minutes before the sentiment report. The report made any trade a coin flip; either price was going to go up or it was going to go down. There are many reports that I would trade in front of, but given price was sitting right below all time highs, I did not think it was prudent to short against it.
The sentiment report came out positive, however price made only a weak attempt to take out the all-time highs. Where did the bulls that spent the week grinding price higher go? My bias was up and I kept expecting the bulls to take over. The ES slowly came off it’s highs and I tried to find an entry opportunity on the pullback, first at the VWAP, then at yesterday’s close. The buyers didn’t step up. Price retested the top, but again no order flow from the institutional sellers to point the way for a short opportunity. Price came down and bounced off the pivot point during lunch and then finally unfolded into a long opportunity I’ve been waiting for. It was a quandary situation because I usually do not trade the afternoons of options expiration; too much potential for unexpected price movements as institutions adjust their portfolios against expiring options. Unfortunately, this long opportunity did not work out as price broke out to the down side.
After stopping in front of the DTG 11.oo level, price once again unfolded into a long opportunity. After losing the first trade, I wanted another chance. Price had moved down too far, too quick and there was a good chance of some mean reversion. The two opportunities are explained on the annotated chart below.
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