5 Fed Speakers on Tap Today

Continue to play the range trade for now.

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Our View

There was a great piece from MarketWatch that laid out this week’s situation. There is another headwind for the S&P 500 this week that BTIG’s chief market technician Jonathan Krinsky and others are watching — May options expiration.

VIX expiration is set for Wednesday and S&P 500 options are set for Friday. In each of the last six years, and 11 of the last 14, Krinsky noted that the S&P has been negative during this week, with an average loss of 1.3%.

Michael Kramer, founder of Mott Capital Management, also weighed in, blaming some of the market churn on the run-up to those expirations.

“Generally, these option expirations have kept the market range bound; currently, support for the S&P 500 is at 4,100 and resistance around the 4,150 level. This week’s focus will be on the bulls’ attempt to surpass the 4,150 mark for the S&P 500, while the bears are eager to bring it below 4,100,” he said.

Kramer notes the stock market has consistently seen activity surges between 1:30 and 2 pm ET, and since jobs data earlier this month, there’s been a “notable” rise in demand that has led to afternoon rallies for the S&P 500.

The action has been “indicating a buy-at-any-cost mentality,” he said, arguing that it looks mechanical. He added that options-related flows and hedging activity are probably an influence here. It’s also where the 0DTE influence likely plays a role too. After the May expiration, many of those observations may very well vanish.

“Additionally, we know that the options market has placed the call wall at 4,200 for some time, and that is the options market’s way of saying it isn’t bullish on the market above 4,200 either,” added Kramer.

However, he did note that volatility could jump ahead of Fed Chair Jerome Powell’s comments on Friday.

It’s worth noting that there are several appearances from Fed speakers this week, with five on deck today. Lastly, Paul Tudor Jones said on Monday that he thinks the Fed is done raising rates.

Our Lean

We’ve had a tight range for several months now and in particular, for several sessions. Over the last seven sessions, the range of the closing prices has been less than 19 points. In order, it includes: 4150, 4161, 4134, 4152, 4144, 4138, 4148.75.

Needless to say, the range is narrowing, while yesterday was an inside day for the ES, with its range completely contained within Friday’s range. Traders, we are going to get some form of a break from this eventually, as the S&P cannot continue to get tighter and tighter without making a move.

Our Lean: I think you have to continue to play the ranges here. Meaning buy the dips into the bottom of the range and sell the rallies into the top of the range. Lately, the top of the range has been around 4165, but extends up to 4175-ish. On the downside, buyers have stepped in around the 4110 to 4115 area.

A break of either side of the range could trigger a stop-run, but if the move is just a knee-jerk reaction to some headlines, it may not last long before reversing back into the range.

I know it’s boring, but it’s the environment we have right now and none of can do anything about it other than adjust to it.

MiM and Daily Recap

The ES traded up to 4156.25 on Globex and opened Monday’s regular session at 4143. After the open, the ES made an early high at 4144, dropped down to the 4123 at 10:19, rallied just above the VWAP at 10:56 then traded in the 4142.00 to 4143.50 level and back-and-filled until 1:11 when the ES rallied up to the 4155.25 level at 1:12. After the high, the ES pulled back down to the 4136.50 level and then rallied up to 4149 at 3:02 and continued to stutter-step higher.

The ES traded 4147 as the 3:50 cash imbalance showed $245 million to sell and traded 4151.50 on the 4:00 futures close. After 4:00, the ES remained in a tight range and settled at 4148.75 on the 5:00 futures close, up 10.75 points or +0.25% on the day.

In the end, it was what it has been: a slow start to the week. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was low at 1.14 million contracts traded.

Technical Edge

We have 14 Fed speakers on the schedule this week and five of them will be today. So beware of any intraday headlines that jar the tape.

We hit a couple of price targets in our individual names, which lets us “get smaller” and creates less stress in managing our open positions.

Notes: DXY. Keep an eye on that $102.40 level laid out from Monday.

S&P 500 — ES

The upside has been capped by ~4175 (and more recently, but 4160-65). The downside limited to ~4115. We need a break of one of these areas to push the outer edges of the range. Even more recently, notice how the ES has pushed higher or lower, then retreated back 4140 to 4150 area by the close.

SPY

Inside day. Need $414.54+ to gain any traction on the long side.

SPX

QQQ

Still watching $328-$331 on the upside and now watching ~$323.50 on the downside for support. “Don’t fix it if it ain’t broke.”

NQ

Still watching the same levels:

TLT

Keep an eye on TLT here. It was hit hard yesterday and is back into the bottom of the range. A little flush here could get us the ~$102.50 gap-fill.

On the upside, $104.25 is the gap-fill from yesterday. Above that and $105.25 to $105.50 is pretty significant resistance until proven otherwise.

Open Positions

Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B

Go-To Watchlist

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Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!