The Opening Print Recap
The ES continued its upward ascent yesterday. The futures opened Thursday’s regular session at 4658.50, traded down to 4654.50, and rallied straight up to 4570.50.
From there, the ES pulled back a few points and traded up to 4674.50, dropped 4 points down to 4670, and then traded up to the high of the day at 4674.75 at 10:20 a.m. After the high, the ES pulled back down to the 4656.50 level — just below where it opened — and rallied back up to the VWAP at 4663.
Again, if you do not trade the S&P futures, the MrTopStep chat room is still a great place to gain an edge. Calling the price action of the S&P is what I have done for more than three decades and it has a far-reaching impact on other assets — like SPX options and the SPY — as well as many individual stocks.
After trading in an 8-point back-and-fill pattern from 12:15 to 3:50, the ES traded 4667.75 as the early MiM showed just $64 million to buy before flipping to almost $1 billion to buy. That popped the ES 7 points in 10 minutes, as it traded 4674 on the 4:00 cash close. The ES settled at 4672.75 on the 5:00 futures close, up 21 points or 0.45% on the day.
In the End
In the end, the futures markets did make new highs but traded in a narrow range for most of the day. In terms of the ES’s overall tone, it was firm all day. In terms of the day’s overall trade, volume was low at 1.13 million contracts traded.
Our View
I have been part of every major stock market move since 1985. The 1987 crash, the 2000 tech bubble, the 2008 credit crisis, the Flash Crash where my desk lost $9.4 million — but none of the rallies after those events compare to the current up move. It has been a relentless rally that has taken no prisoners.
I could add more color, but I think both the longs and the shorts are seeing the same thing.
Our Lean
I really think a 30 or 40 handle pullback is coming. Is it today? I don’t know. What I do know is there is very distinct price action in the ES. Make an early high, pull back, back-and-fill, and then move back up. If you mistakenly ignore the back-and-fill for a selling opportunity you get burned.
Our Lean: Maintain long positions and add on any mild pullbacks — say dips of 1%-ish. Today is the week 1 options expiration. You can sell the early rallies and buy the pullbacks or just buy the pullbacks and wait to see how the late-day trade goes. It’s possible we see some end-of-the-day selling, but even if that happens it won’t be much.
As we all know, there’s no crystal ball when it comes to trading stocks, options, or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk-free for 30 days.
Technical Breakdown — Some Notable Observations
Guys and gals, let’s be honest here: We have absolutely obliterated this past week. AMD, NVDA, and TSLA continue to bombard higher and that has raked in the gains. I want to go into the weekend on a good note and not force anything after such a strong run.
Remember, we have the jobs report to handle before the open.
Below is another daily look at the SPX, but it highlights the recent boom rally we’ve seen from the October lows. These “melt ups” can be tricky if not identified earlier enough, as traders keep looking for the pullback — however minor it will end up being — but continue to see the market climb higher.
Since bursting over the 10-day moving average on Oct. 14, the S&P 500 has been on a tear. In the current stretch, the S&P 500 has rallied in 15 out of 17 sessions. One of those two declines was a loss of just 0.11% and the index has run 8.15% during the current stretch. Honestly, it feels like more.
On Thursday though, we had some interesting observations.
First, the VIX was up almost 7% at one point during the day. That’s not something you typically see as the market is making new all-time highs. Although it did close higher by “just” 2.25%.
Second, breadth was a bit of an outlier. We actually had a ~66% downside volume day on the NYSE. Despite the Nasdaq climbing 0.8% and the QQQ jumping 1.3%, Nasdaq volume breadth was about 50/50. Advance/declines were similar, with just 42% upside in the NYSE and 42.8% in the Nasdaq.
Third, crude got hit, down 2.5% on the day following Wednesday’s 3.6% fall. The dollar, gold, and bonds all climbed on the day. It feels a bit “risk-off” when looking at these five assets — dollar, bonds, gold, crude, and VIX — and excluding stocks.
But we can’t simply exclude the S&P to fit a certain narrative. Price is the leader and that’s our No. 1 indicator. The market can continue to push higher while these observations remain true. That said, we are due for a minor dip and if we get it, it would be healthy action for the bulls.
Gold
Speaking of gold, the commodity continues to struggle with its declining 200-day moving average. However, it’s now above this measure after finding the channel midpoint as support.
If it loses $1,755, then we could see $1,700 and channel support before the end of the year.
On the upside though, there is reason for optimism if we can see a further rotation. Specifically, let’s see if gold can go monthly-up over $1,815.50. If it can, that opens the door to the Q3 high and clear resistance near $1,837.50. A push above that could unlock $1,900+ going forward.
Square
Square is getting hit on earnings, but that doesn’t mean its charts are doomed. The stock is currently trading near its 50-week and 10-month moving averages in the premarket. If we open at those measures, aggressive bulls may consider a dip-buy.
However, more important will be to see how the stock reacts to these measures. Do bulls step in to buy the dip or does support fail?
Both measures have been key support so far this year and held strong as the bear market in growth stocks came to an end in May. If they fail, it will put the October low in play near $223. That’s potentially followed by the $200 area. Keep in mind, growth stocks are not trading that well despite the market’s push higher. Just look at ARKK.
If support holds, I would love to see a close over $245, putting SQ above yesterday’s low and the 200-day moving average. More ideal would be an eventual push through $254, where the stock currently finds a cluster of shorter-term moving averages — the 10-day, 21-day, and 50-day to be precise.
As I said, I’m not looking to force anything today, as it’s been such a good run lately.
Economic Calendar
Disclaimer: Charts and analyses 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!
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