I especially like buying the gap-downs, and while I did buy Sunday night’s open, I bought the ES to cover a short. Around 8:55 AM ET, a Wall Street Journal story said the Iranians want to negotiate a deal. The ES was trading around 6067.25 and rallied up to 6109.00 by 10:20AM ET. Iran then responded with this headline:

#IRAN IRANIAN ADVISOR TO IRGC COMMANDER SAYS “WE ARE READY FOR A LONG WAR AND HAVEN’T YET MADE STRATEGIC USE OF MISSILE CAPABILITIES”

I’m going to say it like it is: the ES and NQ didn’t give a shit about Iran’s response and just kept going up, rallying a total of 106 points from Sunday night’s Globex open—totally overlooking the high intensity of the Israel/Iran conflict.

It’s almost like the headline news algos totally control the markets. It took a while to digest the news, and the ES sold off down to the 6980 level around 3:20, then rallied a little as the 3:50 imbalances came out $1.6 billion to buy, trading up to the 6096 area.

In the end, in terms of the ES’s overall tone, it was firm until late in the day. In terms of the ES’s overall trade, volume was low. When you take out the ESM/ESU spread, total outright volume was 885k.

WTI crude futures fell 1.7% to $71.77 a barrel. U.S. Treasury yields edged higher despite a $13 billion auction of 20-year bonds that attracted solid demand from investors. The yield on the 10-year note closed at 4.452%, gold prices retreated 1% after settling Friday at a new record high, and the dollar index closed flat on the day.

During Operation Desert Storm, from August 1990 to January 1991, the S&P 500 sold off 18%, but recovered swiftly after the war started, gaining 20% between January 16 and June 8, 1991, as the conflict was short-lived and oil prices stabilized. By the end of the war, the S&P 500 had regained its losses and continued to rise, with a 26% increase within a year from its lowest point.

In early 2023, during Gulf War II, the S&P fell only 5.5% and settled up 28.68% on the year.

There are 12 economic reports over the next 3 sessions, including Wednesday’s FOMC meeting. As you can see, the effects of the Gulf Wars I and II were that the S&P initially sold off and then reversed the losses, making some large gains. I’m not sure why the markets aren’t reacting to the Israeli/Iranian war, but Pakistan has stated it would retaliate with nuclear weapons against Israel if it used them on Iran. Trump has left the G7 early and requested that the National Security Council be prepared in the Situation Room upon his return from the summit. It’s also only 22 days until July 9, when reciprocal tariffs are set to take effect after a 90-day pause.e out

Our Lean

The ES had a shaky close but sold off on Globex Monday evening after Trump said in a Truth Social post that “Everyone should immediately evacuate Tehran.” The ES and NQ began selling off, and crude jumped 2%. There was also news that Iran was trying to push Saudi Arabia and Qatar to pressure U.S. President Donald Trump to push Israel toward a ceasefire.

The CAC and DAX fell over 1%, and the FTSE was down 0.75%.

There is a lot of information to digest over the next 3 sessions. It almost feels like an overload. From today to July 9, there are only 15 trading days. Since Independence Day falls on a Friday this year, the markets will be closed the same day Trump’s 90-day tariff reprieve ends. Trump claims to have 200 tariff deals done, but they lack clarity.

Our lean: I think 6050.00 is critical, and I’ll be using it as a swing level. I can’t rule out buying the open, but if the ES starts trading under 6050, we could be looking at the 6030.00 or 6000.00 level.

How to read MTS Levels

ES

The bull/bear line for the ES is at 6076.50. This is the key level that must be reclaimed for bullish momentum to resume. Above this level, we look for potential buying opportunities on dips.

Currently, ES is trading around 6057.50, indicating weakness below the bull/bear line. If the price remains below this level, expect further downside pressure, targeting 6015.00, our lower range target for today, and then 6000.00. A break below these levels could extend the decline towards 5957.00 and 5949.00.

On the upside, immediate resistance comes in at 6091.00, then at 6109.00, and finally at 6138.00, our upper range target. If ES can reclaim 6076.50 and hold above, a test of these resistance levels is likely. Bulls need sustained strength above 6138.00 to confirm a potential reversal, with further resistance at 6195.50.

Overall, the trend remains bearish below 6076.50, and caution is warranted until this level is reclaimed.

NQ – Week to Week

The bull/bear line for the NQ is at 22,087.25. This is the key level that must be reclaimed for bullish momentum to resume. Above this level, we look for potential buying opportunities on dips.

Currently, NQ is trading around 22,045.75, indicating weakness below the bull/bear line. If the price remains below this level, expect further downside pressure, targeting 21,831.50, our lower range target for today. Additional support levels are at 21,772.50, 21,726.00, and 21,591.00. A break below these levels could extend the decline further.

On the upside, resistance comes in at 22,147.25, then 22,222.00, and then at 22,343.00, our upper range target. If NQ can reclaim 22,087.25 and hold above, a test of these resistance levels is likely. Bulls need sustained strength above 22,343.00 to confirm a potential reversal, with higher resistance at 22,583.50.

Overall, the trend remains bearish below 22,087.25, and caution is warranted until this level is reclaimed.