What Can Slow the S&P Bull?
TSLA & NFLX report tonight.
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Those who took our DAL long and the Dow setup yesterday, updates are in the “Open Positions” tab. Nice work.
Apologies on today’s delay — Bret is a bit under the weather.
Our View
The markets are continuing their upward accent. When there’s low volume like we’re seeing now, “thin to win” can take over. We have been talking about it all week and it’s what allows the market to go on the path with the least resistance.
At yesterday’s high, the ES was only 5.5 handles off the big figure at 4600. Since June 1, the S&P cash (SPX) has been up 20 of the last 32 sessions and has climbed in 8 of the past 10 weeks.
The Russell and the Dow — this year’s laggards — outperformed the S&P and Nasdaq yesterday, although all four indices did pretty well. The Dow extended its winning streak to seven days, closing at its highest level since April 2022. The Nasdaq is now up 37% in 2023.
The bull has been raging with little to no pullbacks, but how much longer can it go on?
So far this year, the S&P 500 has had 135 trading days, while 73 have been up and 62 have been down. Total up-points are 2,303 and total down-points are 1,587, for a net gain of 716 points. The most consecutive days up is 6 in a row (in June) and the longest stretch of consecutive down days is 4 in a row (also in June).
Yesterday, the SPX closed at 4554, up more than 500 points from the May low. The post-June 26th low was 4328 and since then, the ES has rallied 236 points in the last 3 weeks. The real kicker is the July low at 4385. Since then, the SPX has rallied 170 points.
So far in the first 11 sessions of July, the SPX has been up 7, down 4, and up 104 points. Since last Monday (7 sessions), the SPX is up 156 points and there are 8 sessions left in July.
I also found this interesting, courtesy of @Handelstats: “Last 9 day of July 2022, 7 up 2 down for a 299 point gain.”
Our Lean
I don’t think the rally is over, but I also don’t think I want to be long at 4600 the first time up.
The PitBull has a rule that the ES usually runs out of gas 20 points above the big figure, if it can get there. HandleSats thinks there is another 64 points of upside in July.
Our Lean: You can sell the early rallies and buy the pullbacks (20 to 30 pts) or just buy the pullbacks keeping in mind how far the ES has rallied.
MiM and Daily Recap
The ES traded down to 4544.75 on Globex and opened Tuesday’s regular session at 4550. After the open, the ES traded down to 4545.25 and rallied up to 4563.50 at 10:10, pulled back a few points and rallied up to 4568.50 at 10:56. From there, it made three separate new highs at 4572.50 at 11:17, 4572.75 at 11:43 and 4579.50 at 11:53, then pulled back to the 4579.75 level and rallied up to 4589.25 at 2:23 — another new high. The ES pulled back to 4583.25 and rallied up to another new high at 4590 at 2:34.
Then the ES rallied up to a lower high at 4589.25, dropped down to 4584 at 3:02, charged up to another new high at 4594.25 at 3:16 and then pulled back to 4587.50 at 3:39 and traded back up to 4594 at 3:47. The ES traded 4593 as the 3:50 cash imbalance showed $4.38 billion to buy, traded 4594.50 and traded 4590 on the 4:00 cash close. After 4:00, the ES continued to pull back, ultimately settling at 4583 on the 5:00 futures close, up 34 points or 0.75% on the day.
In the end, the Nasdaq rebalance scheduled for Friday showed its face early — buy Russell / Sell NQ and buy ES / sell NQ — but that only lasted for the first hour before the index markets charged higher. In terms of the ES’s overall tone, the markets were firm. In terms of the ES’s overall trade, 153k ES traded on Globex and 1.067 million contracts traded in the day session, for a total of 1.22 million.
Technical Edge
SPY
S&P 500 — ES Futures
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NYSE Breadth: 68% Upside Volume
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Advance/Decline: 69% Advance
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VIX: ~$13.25
The Fed is trying to balance rate cuts without slamming the brakes on the economy. While the CPI number came up light last week, so did yesterday’s retail sales and industrial production number.
That’s how the knife can cut both ways and yet, the markets rallied. The trend is on the bulls’ side for now — there’s no sense in fighting it until it fails.
SPY
Going with a different look today, with the 30-min chart. Let’s see how the S&P handles dips to its key short-term, intraday moving averages. It could be a trend day into tonight’s earnings reports.
On a larger correction, don’t sleep on a dip do the 4-hour 10-ema and the $451.75 to $452 area, which was two-day resistance.
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Upside Levels: $455-56
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Downside Levels: $452.50, $451.75 to $452
S&P 500 — ES Futures
I don’t know that we’ll see a dip down to ~4530, but it’s the first “big” spot for dip-buyers to step in. That said, it would require a fall of more than 1.2% from yesterday’s close, which some may see as unlikely in the current tape.
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Upside Levels: 4600, 4620
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Downside levels: 4555-65, 4525-30, 4493-4503
SPX
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Upside Levels: 4565-68, 4585, 4600
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Downside Levels: 4545, 4525-30, 4500-05
NQ
Bigger picture look, then hourly chart below.
Above yesterday’s HOD and 16,100 is in play. The “bigger picture” extension is up near 16,500 and the NQ will need strong earnings reactions to get there.
Now for the hourly:
Notice the Globex consolidation around 15,960, plus/minus about 10-20 points.
If we dip to this area, let’s see if bulls can defend it — at least for a day-trade bounce where we can take some profit and look for a break-even stop.
Below that and the 15,875-85 area is of interest.
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Upside Levels: 16,030, 16,100
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Downside Levels: ~15,960 (outlined above), 15,875-85, 15,740-50
QQQ — POST EARNINGS REACTION IF BEARISH
TSLA and NFLX report tonight. If both are bearish, the QQQ will feel it. I can assign a % to those odds, but I will say, the downside levels are clear in that scenario.
Zone 1 is at $374 to $375, which is the 10-day ema, the 50% retrace of the current rally and the gap-fill.
Zone 2 is the $370 to $372 zone, which was prior resistance and the 21-day moving average, which has been support since early May.
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Upside Levels: $380, $382.50 to $383
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Downside Levels: $375.50, $371-73
Open Positions
Bold are the trades with recent updates.
Italics show means the trade is closed.
Any positions that get down to ¼ or less (AKA runners) are removed from the list below and left up to you to manage. My only suggestion would be break-even (B/E) or better stops.
** = previously mentioned trade setup we are stalking.
Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B. Now Add META, AVGO, UBER, CRM, AMZN, CVS and AMD.
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DOCN — Long from $38.25 — Small trim at $39.75 to $40 and a second trim above $40.75. Trimmed more between $45 and $47 and down to ⅓ at $49.50+
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Should have us down to a ⅓ position. I think we may be able to get $53+ out of this.
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JPM — Retested the breakout zone and long. This is a longer term swing. Many are long from $143-145. Still carrying ¾ to ⅔ of position against a break-even stop-loss.
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Down to ½ if we see $157 to $157.50+
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TLT — gap-filled at $99.65 — got our first trim at 100.75+ and second trim between $101.50 and $102.
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Beautiful! ⅓ to ½ position now vs. a Break-even stop. Can consider exiting more here just to pay ourselves for the risk taken. Otherwise, look for $102.70 to $103 to get down to runners.
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ARKK — Long from ~$46 — trimmed near/at $50. Still carrying ⅔ to ¾ of position.
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Ultimately, this will be a dip-buying name.
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HSY — Longer-term swing. Want to see this one hold $235-36, but willing to be patient.
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DAL — long from $47.20 (daily-up) and trimmed at $48. Down to ⅔ here. Could justify being down to ½ as we did get to the 61.8%. If not down to ½, consider doing so on any push over Tuesday’s high
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Break-even stop
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**SBUX — Double Doji
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DIA — long from ~$346.75. Came within 9 cents of the $350 trim. If you didn’t get it, any new high over Tuesday’s high is a ¼ trim and down to ⅓ if we see $351.50+ Playing the quarterly setup, but want to pay ourselves a bit.
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YM — Want to trim ⅓ if we see 35,225 (or 35,200 for more conservative traders). 34,570 stop that we’ll look to be to Breakeven after first trim.
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Go-To Watchlist
Feel free to build your own trades off these relative strength leaders
Relative strength leaders →
(Lack of updates here but these names remain my top focus list!)
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Growth stocks ARKK — DKNG, DOCN, UPST, SHOP
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LLY, CAH
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AI stocks — NVDA, AMD, AVGO, ADBE, SMCI
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Mega cap tech — MSFT, AAPL, META, CRM
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Select retail — CMG, ELF, LULU, COST
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Homebuilders ITB — TOL, KBH, DHI
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BRK.B
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ABEV, DXCM
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Cruise stocks — RCL, CCL, NCLH
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DAL, DT, AMAT
Relative weakness leaders →
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DIS → new 52-week lows
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CF, MOS
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PFE (all vaccine gains now gone)
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EL, FL, DG
Economic Calendar
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!
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