Market Overview – Morning Express
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The S&P peaked on November 5th and consolidated within a vicious 5% range for nearly two months, before resolving higher on Monday. This breakout ran about 2% and is one of many volatile consolidations that resolved bullishly since the onset of the pandemic. As a futures trader, the ascent in those prices has also extrapolated notional volatility. Given this is a slow news day at yearend and our Bullish Bias has already played out, we are going to use this time to discuss the difference between E-mini and Micro contracts.
I, Bill Baruch, cut my teeth in futures by trading Gold in college. I interned at a small investment bank in Maryland before accepting a job there after graduating in 2006. Futures had always grabbed my focus and it was not long before I left Maryland for the world’s commodity hub in Chicago. In 2007, Gold started the year at $600, the S&P at 1400, and the NQ at 1800.
The main futures contract in Gold was and still is sized at 100 ounces. This was a notional value of $60,000 in 2007. Trading at $1800 this morning, that contract now has a notional size of $180,000, three times the size.
At that time, the main S&P contract was actually not the E-mini, it was five times the E-mini. However, that main contract was used on the floor and slowly wound down, in part due to its large notional size. The E-mini is $50 per point, equaling a notional value of $70,000 in 2007. Today, at 4785, the E-mini S&P now has a notional value of $239,250, more than three times the size.
Even greater, the E-mini NQ, at $20 per point, had a notion value of $36,000 at the start of 2007. Today, at 16,500, it has a notional value of $330,000. NEARLY 10X!
Our point in giving you these details is to suggest that just because the contract has gone 3x or 10x over the last decade, does not mean you must trade 3x to 10x larger. If the E-mini S&P had a range of 5% in 2007, that was only 70 points or $3500. If the S&P has a range of 5% today it is 240 points or $12,000!
This is where the CME has done a terrific job in recent years, rolling out Micro contracts for everything from the S&P to Crude Oil and Ags. Micro contracts are 1/10 the size of normal contracts (for all but Silver and the Ags, which are 1/5). Traders can use multiple Micro contracts to perfectly customize the size of their position. At the end of the day, Micro contracts help reduce volatility in your account and allow for better staying power.
Economic Calendar
– Weekly Jobless Claims were better than expected.
– Chicago PMI due at 8:45 am CT.
– Chinese Manufacturing PMI released tonight at 7:00 pm CT.
Please, reach out to our trade desk at 312-278-0500, we would love to connect and discuss the contract sizes available to you.
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4778.50, down 3.75
NQ, yesterday’s close: Settled at 16,490.50, up 2.50
– Price action in both the S&P and NQ is consolidating very well and creating a pennant, likely signals a resolution in the direction of the underlying trend; higher.
– Still, we are taking a cautious approach given yearend and thin trading.
– Our intermediate-term target remains 4850
– First support in the S&P has held terrifically at 4772-4773.50
– First support, previous ceiling, in the NQ has been violated. Although this level remains important, major three-star support aligns more with … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (February)
Yesterday’s close: Settled 76.56, up 0.58
– Yesterday’s EIA inventory report was bullish; headline draws more than expected despite a rise in Net-Imports and estimated production.
– Price action rose to our intermediate upside target and major three-star resistance at 77.44-77.81 with a high of 77.37 and was rejected dramatically.
– The rejection of $2 held first key support and has remained constructive
– These are the type of swings that can happen in thin markets, bears/algos defending massive resistance.
– Do not want to see a head and shoulders pattern develop on the hourly, must clear new highs.
– Pivot and point of balance at Click here to get our (FULL) daily reports emailed to you!
Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1805.8, down 5.1
Silver, yesterday’s close: Settled at 22.858, down 0.263
– Big whipsaw yesterday. Despite failure from above, bulls defended support. Huge to preserve the developing bullish trend.
– In recent weeks, Managed Money has reduced Net-Long significantly. They are now very under-positioned for a move higher. We find this very favorable.
– Price has been constructive since yesterday’s selling and is back above our momentum indicators.
– Like we said yesterday, in order to neutralize yesterday’s selling, we must see a close above … Click here to get our (FULL) daily reports emailed to you!
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