Many Traders “Lost for Words” as June Opex Arrives

S&P Rides a six-day win streak, it’s longest since Nov. 2021

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Our View

I was bearish coming into this year, but as you know I have had a much more bullish bias over the last few months. When the flow of the market changes, you have to change too; the market has no problem draining your account because of stubbornness.

Many traders were looking for volatility expansion this week. I know I was too, given that the S&P 500 had rode a four-week win streak into year-to-date highs with the CPI, PPI, Fed, Retail Sales and quarterly Opex all on tap.

Yet it hasn’t mattered one bit.

The VIX did creep up — rallying 4.5% yesterday, interestingly — but by and large, the shorts keep taking it on the chin. The S&P is on a six-day win streak, its longest stretch since Nov. 2021, while it looks to extend its weekly winning streak to five in a row.

Given that it’s up about 3% so far this week, it seems likely to get it.

Our Lean

Trading today is not for the faint of heart. It’s quarterly Opex, where the unwinding and rolling of futures and options contracts are going to drive the action — “action” of which can be quite sloppy. There’s a reason many experienced traders don’t bother with trading these sessions.

It’s not that it’s impossible to do so, it’s that they tend to be sloppier and choppier and it’s much easier to trade into Opex and after it than on it.

Of course, we also have the Monday holiday as well, so we’re going into a three-day weekend — which is even more incentive for experienced traders to turn it into a four-day weekend.

That said, Our Lean is that it’s hard to turn from bull to bear, but at some point, this rally will be too tired to keep going in the short term. It doesn’t help that we are getting overextended and that the seasonalities beyond June Opex are not great. That said, I’d rather stick with the trend here until it fails rather than guess on when it will fail. It’s hard to be a seller into higher highs and higher lows.

For now, let’s keep buying some of the deeper dips in the 15-30 handle range but let’s use smaller size to do so. That’s for two reasons, the first being that it’s Opex, the second being that no one needs to ruin a decent week with a poor day of trading before a long weekend.

As for levels, I am watching 4485 and 4500 on the upside. Above that is 4510-12 and 4520-25. On the downside, I’m watching 4460, 4440, 4420-25 and the big ole 4400 level.

MiM and Daily Recap

The ES traded down to 4393.75 on Globex and opened Thursday’s trading session at 4408.25. All the selling on the ES was done overnight, as the futures exploded right off the open. The ES dipped 1 point on the open, then rallied 35 points to 4442.25 in the opening hour, pulled back 13 points to 4429.25 and rallied almost 30 points up to 4457.50 at 11:30. The ES did some back-and-fill and chopped in a 10-point range, traded a low of 4447 at 1:15, then rallied 38.50 points to a session high of 4485.50 at 2:45.

From there, the ES embarked on a clear but mild pullback for the rest of the session, trading down to 4477.75 as the 3:50 imbalance meter showed more than $800 million to buy — the MIM is now up 5 days in a row, by the way. It rallied up 4481.25, then dipped to 4466.75, down about 15 points in just a few minutes, before closing at 4472.75 at 4:00. After 4:00, the ES dipped more before trading sideways and settled at 4467.50 at the 5:00 futures close, up 52.75 points or 1.20%.

In the end, every time the ES looked tired and ready to roll over, the bulls stepped in and jammed it higher. In terms of the ES’s overall tone, it was very firm. In terms of the ES’s overall trade, volume was steady at 1.95 million contracts.

Technical Edge

I have a handful of individual stock setups I will pass along closer to 9 a.m. for those interested. But I will stress here (as I will then too) that today’s Opex, the long weekend and ensuing price action must be taken into consideration.

S&P 500 — ES (September Contracts)

The ES is now up 180 points from last week’s low to this week’s high, or 4.16%.

Thought Out Loud: Can we get a dip back down to the 10-day ema and the 50% to 61.8% retracement zone between 4396 and 4375?

A quick glance at the 4-hour chart. If we get the 10-ema on the 4-hour to align with the ~4460 area (aka overnight support), that may be worth a shot on the long side.

SPX

As for today’s levels:

SPY

If the SPY fell 2% to 2.5% today, it would feel like a gut-punch to longs. But I’ve got to say, it would be quite healthy from a technical perspective.

Above is a 15-minute and 1-hour look at the. If we see ~$441 early in the day (aka the 10-ema on the H1 chart and a prior consolidation level from yesterday), that may be worth a dip-buying spot.

NQ

It took the NQ more than five full months to rally 3,700 points or 28%. In the last six days though, it’s up more than 1,000 points or 7%. Pretty impressive for the bulls.

Open Positions

Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B. Now Add META, AVGO, UBER, CRM, AMZN and CVS.

A great round of action and now an empty book for the first time in a long time!!

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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!