March 15th, 2019 Newsletter

Ban short selling not a great idea along with mini SP500 outlook

March 15th, 2019 - Issue #957

In This Issue

1. Save Fintech? Ban Short Selling. It's Not That Simple
2. Hot Market Report: Mini SP500 testing important levels on the way up.
3. Economic Calendar

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1. Save Fintech? Ban Short Selling. It's Not That Simple

By Murray Gunn and Brian Whitmer

The pinhole puncture in the global "Fintech" bubble keeps growing, despite drastic attempts to seal it shut. The most recent and radical attempt occurred on February 18, when BaFin, Germany's financial regulator, issued a temporary short-selling ban in Wirecard after its shares plunged 40% in less than three weeks. Wrote one news source, "Germany bans speculative attacks on Wirecard stock", as if those shorting the market were wielding pitch forks and lobbing actual threats against the stock's upside.

Incredibly, vilifying short sellers is as old as the market itself. The first short-selling ban occurred in 1610, after the Dutch East India Company crashed. Notorious short-seller Isaac Le Maire was barred from the market, leaving Amsterdam a pariah. In the 1790s, Napoleon Bonaparte charged short sellers with treason during the financial chaos of the French Revolution.

And, most infamous is Jesse L. Livermore, the brilliant trader who shorted the U.S. stock market in September 1929, earning $100 million ($1.7 billion in today's money) in the ensuing crash. Livermore was publicly skewered in newspapers as the "Great Bear of Wall Street."

Still, history shows that the draconian move of banning short selling is hardly effective. Amidst the Livermore debacle, the newly minted U.S. Securities & Exchange Commission made plans to reinstate a century-old short-selling ban, which didn't go into effect until 1934 -- after the U.S. stock market had already lost 89% in value. 

In 2008, the SEC, acting in concert with the UK Financial Services Authority, prohibited short selling in 799 financial companies to stem the bleeding from the subprime mortgage meltdown. SEC Chairman Christopher Cox gave this assurance of the ban's efficacy: "The emergency order... will restore equilibrium to markets."  Yet, instead, the global financial sector entered an accelerated and prolonged period of chaos and value destruction.

Now, we have BaFin's attempt to save Fintech by banning short selling in one of the sector's most iconic companies. BaFin noted the importance of Wirecard to the German market and economy, and heartened: "There was risk of further downward spiral without restrictions on shorting the stock," echoing Christopher Cox's confidence in 2008. The strategy won't work, because short selling isn't causing the market's decline; an ongoing negative social mood trend in Europe is. As the most sensitive meter of social mood, Fintech stocks warned of this shift long before there was a sustained downturn. (See other signs of a negative shift in social mood across Europe here.

The first signs began to emerge last fall. In September 2018, we observed how the financial technology sector had become another benefactor of society's blooming optimism. But that optimism had then reached a dangerous extreme, as evidenced in the soaring valuations and growth forecasts across the industry. Soon after, Wirecard replaced Commerzbank, a 149-year old institution, on the DAX 30 index. We warned, "The Global fintech Thematic Index [is]on course for a jaw-dropping setback. … In fact so many mania symptoms plague the sector that the sell-off could be catastrophic."

Depicted below is the sudden reversal in Wirecard and the Global fintech Thematic Index that followed, in which the latter's shares dropped 57%.

Jesse L. Livermore, the trader blamed for the 1929 U.S. stock market crash, was known to have said: "All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope."

When there's hope, and prices are rising, short selling is deemed a necessary part of a balanced system that encourages free will speculation. When that hope turns to fear, short selling is then vilified as the cause of market crashes. We believe many of the components of that shift are well underway in Europe now.

Radical politics. Secessionist movements. Crumbling economies. Follow this link to discover more signs of a shift toward negative social mood across Europe.

2. Hot Market Report: Mini SP 500 testing 6 months high - What's next?

By Joseph Easton Senior Broker

Click on image below to enlarge

ES futures; This week’s highlighted Market is mini SP 500 futures.Part of the stock index family that includes mini NASDAQ 100, mini Russell, mini Dow, Mid cap, Nikkei and a few more. Most traded on the CME/CBOT/GLOBEX exchanges.

Daily Chart of ES Futures for your review from this morning ( March 15th 2019).

Today 3/15/19 is contract expiration for March ES -S&P 500 Futures (Quadruple Witching, Stock options, futures, futures options and single stock futures). Contract roll is a natural time for markets to trend because orders are forced based on expiration. A good way to use E-Futures charts is to add an @ sign in front of the symbol, this is for continuous charts, as seen to the right. Ex. @ES. ES exceeded the 10/17/18 high of 2824 this week. This is significant because it is a new 6 month high. If the market can close over this level on a weekly chart it would be a bullish indication.

ES is probably the most popular market for day traders. LARGE volume, liquidity and good ranges as well as being the first electronic Mini Stock Index contract in the US back in 1997, make the ES "the king for day-trading". One thing to understand is that the aggressive day-trading margins most firms, including Cannon, offer for markets such as the NQ and ES can be a double edge sword. With $500 day-trading margins, you as a trader control LARGE amounts of money and that can translate to large fast losses or gains in volatile manner. I urge you to create a self imposed margin that is higher. Be aware, be careful. This chart was prepared using CQG Q Trader software, which you can demo for 14 days with realtime data.
To access a free trial to the ALGOS shown in the chart along with other tools, visit and sign up for a free trial for 21 days with real-time data.

Mini SP500 Futures Specs
Hours: 5:00 PM to 4:00 PM next day PM Central Time
Margins: $6600 initial, 6000 Maint. ( as of the date of this newsletter)
Point Value: full point = $50 ( Example: 2819.00 to 2820.00 ). Min fluctuation is 0.25 = $12.50 ( Example: 2819.00 to 2819.25) Settlement: Cash on the open of the third Friday of each QUARTER ( June, Sep, Dec, March )
Months: Quarterly cycle, June, Sep, Dec, March. M,U,Z,H
Weekly Options:YES
Mini SP 500 is one of my favorite markets for Day Trading because of the intraday range and movements. Be careful, these factors can work against you or in your favor.
Some of the basic fundamentals to keep in mind when you are considering trading the NQ or other indices for this matter:
1. Longer term view of current market prices
2. Dates and times of important reports. CPI, Housing, employment, FOMC are just some of the reports you need to watch for
3. Earning reports
4. U.S. Fiscal and Monetary Stability

Our brokers here at Cannon will be happy to chat about the MINI SP500 market, other indices, other futures, options, futures spreads and much more! Feel free to contact us at any time.

3. Economic Calendar

Source: Moore Research Center, Inc.

Date Reports Expiration & Notice Dates
03/15
Fri
7:30 AM CDT - Empire State Manufacturing(Mar)
8:15 AM CDT - Capacity Util & Industrial Prod(Feb)
9:00 AM CDT - Univ of Mich Sentiment-Prelim(Mar)
9:00 AM CDT - JOLTS-Job Openings(Jan)
11:00 AM CDT - NOPA Crush
3:00 PM CDT - Net Long-Term TIC Flows(Jan)
LT: Mar E-Mini Dow(CME)
Mar E-Mini S&P 500(CME)
Mar E-Mini NASDAQ(CME)
Mar Russell(CME)
Mar Lumber(CME)
Mar E-Mini Dow Options(CME)
Mar E-Mini S&P 500 Options(CME)
Mar E-Mini NASDAQ Options(CME)
Mar Russell Options(CME)
Apr Crude Lt Options(NYM)
Apr Orange Juice Options(ICE)
Apr Sugar-11 Options(ICE)
03/18
Mon
8:00 AM CDT - NAHB Housing Market Index(Mar)

 
 
FN: Mar Lumber(CME)
LT: Mar Currencies(CME)
Mar Eurodollar(CME)
Mar Mx Peso(CME)
Mar US Dollar Index(ICE)
Mar Eurodollar Options(CME)
03/19
Tue
9:00 AM CDT - Factory Orders(Jan)
3:30 PM CDT - API Energy Stocks
 
 
LT: Mar Canadian Dollar(CME)
Mar Coffee(ICE)

 
03/20
Wed
6:00 AM CDT - MBA Mortgage Index
9:30 AM CDT - EIA Petroleum Status Report
1:00 PM CDT - FOMC Rate Decision(Mar)
1:30 PM CDT - Fed Chair Press Conference(Mar)
2:00 PM CDT - Dairy Product Sales
LT: Mar 10 Year Notes(CBT)
Mar Bonds(CBT)
Apr Crude Lt(NYM)
Apr Platinum Options(NYM)
Apr Palladium Options(NYM)
03/21
Thu
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly
7:30 AM CDT - Current Account Balance(Q4)
7:30 AM CDT - Philadelphia Fed Index(Mar)
9:00 AM CDT - Leading Indicators(Feb)
9:30 AM CDT - EIA Natural Gas Report
3:30 PM CDT - Money Supply

 
 
 
03/22
Fri
9:00 AM CDT - Existing Home Sales(Feb)
9:00 AM CDT - Wholesale Inventories(Jan)
1:00 PM CDT - Treasury Budget(Feb)
2:00 PM CDT - Cattle On Feed
2:00 PM CDT - Cold Storage
FN: Apr Crude Lt(NYM)
LT: Apr 2,5,10 Year Notes Options(CBT)
Apr Bonds Options(CBT)
Apr Canola Options(CBT)
Apr Wheat Options(CBT)
Apr Corn Options(CBT)
Apr Oats Options(CBT)
Apr Rough Rice Options(CBT)
Apr Soybeans,Soymeal,Soyoil Options(CBT)

03/25
Mon
9:00 AM CDT - New Home Sales(Feb)
 
 
 

 
 
 
03/26
Tue
7:00 AM CDT - S&P Case-Shiller Home Price Index(Jan)
7:30 AM CDT - Housing Starts & Building Permits(Feb)
8:00 AM CDT - FHFA Housing Price Index(Jan)
9:00 AM CDT - Consumer Confidence(Mar)
3:30 PM CDT - API Energy Stocks
LT: Apr Copper Options(CMX)
Apr Gold & Silver Options(CMX)
Apr Natural Gas Options(NYM)
Apr RBOB & ULSD Options(NYM)

03/27
Wed
6:00 AM CDT - MBA Mortgage Index
9:30 AM CDT - EIA Petroleum Status Report
2:00 PM CDT - Dairy Product Sales
 
LT: Mar Copper(CMX)
Mar Gold & Silver(CMX)
Mar Platinum & Palladium(NYM)
Apr Natural Gas(NYM)
03/28
Thu
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly
7:30 AM CDT - GDP-Third Estimate(Q4)
7:30 AM CDT - GDP Deflator-Third Estimate(Q4)
9:00 AM CDT - Pending Home Sales(Feb)
9:30 AM CDT - EIA Natural Gas Report
3:30 PM CDT - Money Supply
FN: Apr Natural Gas(NYM)
LT: Mar Feeder Cattle(CME)
Mar Feeder Cattle Options(CME)
FN=First Notice, OE=Option Expiration, LT=Last Trade

Disclaimer: This calendar is compiled from sources believed to be reliable. Moore Research Center, Inc. assumes no responsibility for any errors or omissions. It is meant as an alert to events that may affect trading strategies and is not necessarily complete. The release dates for certain economic reports may have been rescheduled.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

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