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In the world of big tickets and big money, the large hedge funds and investment firms never cared about what the retail traders were doing, nor did they even want to hear about it. Maybe one or two times in my 35 years on the floor have I heard a fund trader ask me what the retail was up to ...

The credit crisis and the customer base: Not very often do you hear the little guys complain, you really don't. Most of the time when something big is going on the networks reach out to the most well-known. They do not take the time to roll the cameras in front of a “little” guy or someone who is not in the public eye. When all the big Wall Street brokerage and trading firms were going out of business during the credit crisis, did you see any small retail guys complaining about losing 50% of their retirement account? I know a lot a people lost a lot of money, but in all honesty I personally did not hear that many people complain. What did happen when the losses started piling up was that thousands of people quit trading. Personally, I lost all my retirement money and my daughter’s college money, so I do know what it feels like, and to tell the truth I never complained. Did I like what was going on? No, but like many people there was nothing I could do about it. Unlike the futures and the zero sum game, my losses were real and they came all in one day, the day of the flash crash. For others it was a slower process. That said, I firmly believe that if there were 2 million retail futures traders in the United States that number is a third of what it was prior to 2007. It’s a simple thought process, if you can't pay your mortgage or your electric bill or your phone you're probably not trading your futures account. Most of this damage was prior to MF Global and PFG, they were just the icing on the cake.

Take a licking and keep on ticking: The retail traders of today are far better informed than many of the new, young traders who work at the banks and hedge funds. It’s a perfect example of what a college education cannot teach you. Today’s retail traders have been through a tsunami of economic and fundamental changes that have occurred over the last several years. The speed of the changes has brought on new awareness. The smaller traders have the same access to the exchange data feeds and high-speed access as the big investment firms do. The other part that no one talks about is most of the trading systems and algorithmic programs are being written by young people getting out of college and other retail traders. And the existing retail traders don't sit around losing money like they used to either.

In the end we all know that in order to stay ahead of the curve you constantly have to be retooling, looking for other things that work. The other part is if  you made it this far there is a good chance that you have adapted to the new world trading order. As a street guy I have learned to roll with the punches and I try my best to have a forward-looking view.  I don't like what happened during the credit crisis, but I all can do is put my head down and plow forward. If that means knocking off a few brokers along the way... so be it.

Trade well,

Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.

Our view: Remember how there was a period when the S&P futures were down Monday through Wednesday and then would firm up Thursday and Friday? Well, that’s where I think we are today. The other part of this is the Pit Bull’s rule about looking for a low the Thursday / Friday the week before the expiration. Our guess is the futures continue up a bit this a.m. and that you can sell the rally but the idea over the next few days is to switch the bias to buying weakness. As always, keep an eye on the 10-handle rule and please use stops.

According to the Ned Davis S&P cash study for the January expiration:

Friday           has been up 13/ down 16 of the last 29 occasions

Monday        has been up 13/ down   9 of the last 22  occasions
Tuesday        has been up 19/ down 10 of the last 29 occasions
Wednesday   has been up 15/ down 14 of the last 29 occasions
Thursday      has been up 17/ down 12 of the last 29 occasions
Friday           has been up 16/ down 13 of the last 22 occasions

Monday        has been up  9/ down 13 of the last 29 occasions

  • It’s 7:15 a.m. and the ESH is trading 1461.50, up 5.75 handles; crude is up 94 cents at 94.04; and the euro is up 60 pips at 1.3122.
  • In Asia, 8 out of 11 markets closed higher (Shanghai Comp. +0.37%, Hang Seng +0.59%)
  • In Europe, 8 out of 12 markets are trading higher (CAC -0.23%, DAX +0.22%).
  • Today’s headline: “S&P 500 Futures Gain, Spanish Bonds Rally”
  • Economic calendar: Today: Jobless claims, wholesale trade, natural gas inventories, Fed's George speaks, 30-yr bond auction, Fed's Bullard speaks, Fed's balance sheet, money supply, Fed's Kocherlakota speaks. FRIDAY: International trade, import and export prices, Fed's Plosser speaks, Treasury budget, Best Buy to report holiday sales and earnings from Wells Fargo
  • Total volume: 1.18 mil ESH and 7.8k SPH traded
  • Fair value: S&P +5.75, NASDAQ +13.75
  • MrTopStep Closing Print Video:


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