Powell on Tap; S&P Endures Much-Needed Dip

We’re finally getting a little reprieve after a big rally

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Our View

Depending on who you ask (and thus, based on some measures) we’re back in a bull market. Whether that’s the case or not, you cannot argue that sentiment has turned around significantly.

While just a handful of stocks drove a bulk of the gains in the first five months of the year, we’re starting to get more participation from more stocks. Whether that lasts, I don’t know, but you can’t argue with the fact that people are feeling a lot better about the market right now.

Morgan Stanley’s chief US equity strategist Mike Wilson notes that “sentiment and positioning has turned outright bullish as both retail and institutional investor sentiment has reached its highest levels in over 2 years and registered readings in the top quintile of the past several decades. However, given his fundamental view on growth, he finds it hard to get on board with the current excitement and narrative supporting it.”

Our Lean — Danny’s Trade

The ES has been down 2 days in a row. While that’s hardly a win for the bears, it gives the S&P a much-needed break.

Fed Chair Powell speaks on Capitol Hill at 10:00 a.m. ET and Fed Gov Meister speaks at 4:00. Navigating the Powell headlines is going to be tricky and I for one can’t predict what they will do (no one can). But know that it’s happening and know that the algos will likely cause some ripples.

4425-4430 is a key zone today. Our lean is to sell any 20 to 40 point rally. That doesn’t mean you can’t buy weakness, but we still think we see lower prices overall. On the downside, watch 4400 — it’s the halfback of the rally.

MiM and Daily Recap

The ES sold off down to 4432 on Globex and opened Tuesday’s shortened holiday week at 4435. After the open the ES traded 4441.75 and sold off down to 4410.50 at 10:31 and then started grinding higher and traded up to 4440.75 at 12:53, pulled back down to 4434.75 and then traded up to 4444.75 at 1:24. From there, it dropped down to 4432.25 at 3:40 and then rallied up to 4438.50 at 3:46.

The ES traded 4440.50 as the 3:50 imbalance showed $79 mil to sell then widened out to $1.2 bil to sell. The ES traded 4434 on the 4:00 cash close then sold off down to 4428 at 4:06, traded in a narrow trading range and settled at 4430.50 on the 5:00 futures close, down 23.25 points -0.52% on the day.

In the end, the ES followed one of PitBull’s rules — it started out weak and closed weak. In terms of the ES’s overall tone, there were some short-covering rallies that we sold. In terms of the ES’s overall trade, volume was on the low side at 1.48 million contracts traded.

Technical Edge

Not crazy to be on the lookout for an undercut of yesterday’s low to run some stops, then a potential bounce if we can reclaim that low.

S&P 500 — ES (September Contracts)

Still looking for that 50% to 61.8% retrace zone and the 10-day ema as a dip-buy spot. Seems so simple, but it’s a test in patience.

SPX

As for today’s levels:

SPY

Ideally we get an actual tag of the 10-day ema. If we do, it would align with a potential undercut-and-reclaim of yesterday’s low at ~$435.

NQ

QQQ

Would love to see the $360.50 area tested, which is the 10-ema and the 50% retracement of this latest burst.

An overshoot puts $357.50 in play, which is the 61.8% and prior short-term resistance which preceded the latest ramp higher.

On the upside, bulls need to regain $370+ to get back to the high near $373.

INTC

You know the setup. INTC is on watch for a test of the almost Q1 high (technically the April 4th high) near $33.85 and the rising 10-day ema.

Guest Post

Topic: PTG/Taylor 3 Day Cycle

Author: David D Dube’ (a.k.a. PTGDavid)

Prior Session was Cycle Day 1 (CD1): Market declined surpassing Violation Levels and established a new Cycle Low at 4410.50. Price then sharply reversed direction, rallying 35 handles up to 4445, which was our stated initial target level, based upon DTS 6.20.23 briefing. Prior range was 40 handles on 1.337M contracts exchanged.

…Transition from Cycle Day 1 to Cycle Day 2

This leads us into Cycle Day 2 (CD2): Core initial rally objective (4445) is in-place, so we’ll be anticipating a “normal” Cycle Day 2 consolidation type day to start. Secondary cycle targets remain open to 4478 handle. Fed Chair Powell testifies today, so markets may react to his commentaries. As such, scenarios to consider for today’s trading.

Bull Scenario: Price sustains a bid above 4435, initially targets 4450 – 4455 zone.

Bear Scenario: Price sustains an offer below 4435, initially targets 4420 – 4415 zone.

PVA High Edge = 4444 PVA Low Edge = 4428 Prior POC = 4436

*****The 3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.

For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:

Link to access full Cycle Spreadsheet > > Cycle Day 2 (CD2)

Range Projections and Key Levels (ES) Sept 2023 (U) Contract

HOD ATR Range Projection: 4477; LOD ATR Range Projection: 4390; 3 Day Central Pivot: 4450; 3 Day Cycle Target: 4445; 10 Day Average True Range 47; VIX: 14

Thanks for reading,

PTG David

Open Positions

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

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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!