The surprise victory of Republican presidential candidate Donald Trump in the 2016 general election sent shockwaves through both the political and financial establishments. With the odds of Democratic candidate Hillary Clinton being victorious estimated at more than 90%, the vote’s outcome appeared a foregone conclusion. As tallies rolled in from precincts around the U.S., traders took to the futures markets in anticipation of the final decision.
By the time Donald Trump was declared the new president-elect at 2:30 a.m. EST on November 9, the markets had gone on a wild ride. Price action facing S&P 500 and DJIA futures was extremely negative, producing more than a 4% drop in each. E-mini trading systems fed on the bearish momentum, running both indices into a steep downtrend during the U.S. overnight session.
As a general rule, markets are not fond of uncertainty. Trump’s upset victory prompted futures participants to reevaluate existing positions and strategies. However, it was not long before the pro-business promises of the incoming administration won the favor of equities investors. For the S&P 500, the general election of 2016 kicked off one of the strongest bull markets in recent history.
Metrics of the Trump Rally
Looking strictly at the numbers, the U.S. economy has performed well under the Trump administration. From Inauguration Day 2017 to February 2018, several areas have shown significant growth:
| Metric | Rate of Change |
|---|---|
| Employment | +1.91 Million Jobs |
| Wage Growth | +2.3% |
| Average Quarterly GDP Growth Rate | +2.8% |
| S&P 500 Total Returns | +22.6% |
| DJIA Total Returns | +31.0% |
The S&P 500 has surged nearly 23% since Trump’s inauguration, primarily due to underlying market fundamentals. Passage of the 2017 tax cuts, sustained GDP growth, and limited inflation are commonly cited reasons behind the S&P’s strength.
With such a rapid appreciation of value, interest in U.S. equities has exploded. Subsequently, enormous volume and enhanced volatility in E-mini S&P 500 futures have become a part of day-to-day business.
The E-mini S&P 500
One of the most popular futures contracts offered by the CME Group is the E-mini S&P 500. Featuring daily traded volumes measured in the millions, E-mini S&P futures provide optimal market liquidity and depth. Here are the contract specifications:
| Symbol | ES |
|---|---|
| Contract Unit | $50 X S&P 500 Index |
| Tick Size | .25 Index Points |
| Tick Value | $12.50 |
| Settlement | Financial |
The futures margin necessary to trade the E-mini S&P 500 is specific to each brokerage firm and may vary according to prevailing market conditions. Futures brokers commonly offer small e-mini day trading margins, as low as $500. The availability of leverage coupled with consistent market liquidity make the E-mini S&P 500 a great target for active traders.
E-mini Trading Strategies for the Trump Rally
Finding e-mini day trading strategies that work can be a challenge. It seems that everyone is interested in capitalizing on the recent bull market, and the E-mini S&P 500 is a prime target.
Here are several popular strategies for engaging the E-mini S&P 500 amid the Trump Rally:
- Buying dips: In strong bull markets, many traders champion an approach of “buying dips.” Following any considerable sell-off or retracement, a long position is entered. It is a basic strategy, but one that has been very successful when applied to the E-mini S&P 500 since Inauguration Day.
- Fundamentals and order flow: On the release of a scheduled economic report, volatility spikes creating chaotic short-term pricing. Operating under the assumption that market sentiment is inherently bullish, traders and investors look for opportunities to go long during periods of “hot” order flow.
- Trading technical indicators: The robust levels of participation have created opportune conditions for the use of technical indicators. Scalping strategies from defined support and resistance levels or capitalizing on breakouts using momentum oscillators are common ways of trading the action.
It’s important to realize that no strategy or system is bulletproof. The absolute best course of action for trading any product is to develop a comprehensive trading plan. By defining your available time and capital resources, you can craft a suitable approach to any market.
Getting Started With E-mini Trading
For timely insight and analysis into the E-mini S&P 500 futures market, contact the pros at Daniels Trading. Behind a wealth of resources and robust technology, they stand ready to help you take your trading performance to the next level.
