The ES opened below our 92.50/93.25 after already rotating through it pre-market. It continued to move down initiated by the poor PPI number and dismal NY Mfg number into our next area of 86.50/87.25. Sellers were selling hard but could not push price beyond the range. Price rotated back up far enough to start stopping out many who shorted. On the next rotation down, the selling was much lighter and there was little interest in pushing price down further as indicated by light volume at the low of 86.75. The institutions were also buying. After the close of the down rotation bar, a good long entry was around 1088. Price moved up to the VWAP and bounced off. The trade then took a little heat, then moved back towards the VWAP again. This trade just ran out of time as it approached 10am EST. With all the missed numbers lately, it’s not a good idea to sit through a news release. Once open volume started thinning out on the DOM, it was definitely time to get out of the trade.
The 10am Philadelphia Fed number came in at a horrible 5.1, well below the consensus of 12.0 and indicating much slower growth than June’s reading of 8.0. The ES responded by selling off. With news events that change trader expectations, you must be very careful with fading fast markets. The best strategy is to give it some time to settle down. The ES stair-stepped our levels on it’s way down. It bounced and rotated off 84.50, then 82, then 77.25 before trapping a lot of sellers below 77.25 and beginning it’s upward trek.