August Opex Is Here

It’s been a powerful rally for the bulls

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Our View

Aside from me not trading that great yesterday, HandelStats killed it. He laid out the entire move on his chart for me Wednesday night and explained in detail what was going to happen, I shit you not. He was looking for an up move of 100 handles. At 3:40 pm, the ES was up 90 points.

What I told the chat room is that after Rich switched his database and brought in a full time summer coder, he has raised the bar and pushed things closer to automation. I’m not sure what’s happened to me. I keep hearing war drums and yet, the ES keeps rising.

Our Lean

According to the Stock Trader’s Almanac, the August opex day is less bullish lately, down 8 of the last 13 occasions. The week after expiration is mixed, with the Dow up 9 of the last 18 occasions, (and down 4.2% in 2022). I am not sure how significant the stats will be, with as much as the ES and NQ are stretched out.

After forced liquidation and massive margin calls on the way down — punishing the longs — it’s been nearly two straight weeks of punishing the shorts in one of the most lightning fast rallies in quite some time. I also mentioned to the PitBull about the Thursday / Friday low the week before the expiration (so, last week) and I thought he was going to cry. His rule was the key to his rally and we have watched that rule for over 30 years.

Our Lean: I think the reason the ES keeps going up has a lot to do with money flowing back into the big stocks. I know we keep seeing imbalance sells, but I am talking about new money going in. BofA said their clients moved $5.3 billion back into the stock market and they can’t be the only banks.

After a six-day rally in the S&P, the ES rallying 459 points off its 5120 low, and the somewhat negative stats, I think today could be a down day. If I’m wrong 5620-5630 is on tap. Let’s look at what Rich has to say.

MrTopStep Levels:

How to use MTS levels

@HandelStats OPEX

OPEX this year so far:

January – Day before Opex was Up and Opex day Was UP (Both UP)
February – Day before Opex was UP, OPEX day was Down
April- Day before Opex was Down, OPEX day was Up
March- Both Days were down
April- Both Days were down
June- Both Days were down
July- Both Days were down

For August only (since 2008). Both days have been up-days 7 times. On 3 instances, the day before Opex was up followed by down days, and 1 time, it was a down day followed by an up day.

MiM and Daily Recap

ES Recap

The ES traded down to 5471.50 on Globex just after 7:00 a.m. and rallied all the way up to 5534.75, opening Thursday’s regular session at 5532.50. After the open, the ES printed 5529.75, rallied up to 5539.75 at 9:38, pulled back to 5526.75 at 9:44, then rallied 17.5 points up to 5544.25 at 10:04. It pulled back to 5526.25, then rallied 30.75 points up to 5557.00 at 11:18, pulled back to 5550.75, rallied to a new high of 5559.50, pulled back to 5553.75, and then rallied 11.5 points up to 5565.25 at 12:24.

After this high, the ES fell 1.5 points to 5550.75 at 12:48, rallied to 5558.25, sold off to 5552.75 at 1:11, and then moved up 10 points to 5562.75. It pulled back to 5560.25 at 1:45, rallied to 5564.75, sold off to 5562.25, and then rallied to 5567.25 at 2:05. It pulled back to 5562.25 at 2:17 and then rallied to a new high of 5569.00 at 2:46. The ES pulled back to 5562.25, rallied back up to 5571.75 at 3:36, then started to go offered and sold off to 5568.25 as the 3:50 cash imbalance showed $3.6 billion to sell. It sold off to 5557.25 at 3:53 and rallied to 5569.00 at the 4:00 cash close.

After 4:00, the ES rallied to 5570.75, sold off to 5562.75, rallied to 5570.50 at 4:30, and then sold off to 5564.75. It traded at 5567.00, up 85.5 points or +1.56%. The NQ settled at 19,568.25, up 417.50 points or +2.8%. The yield on the benchmark 10-year note ticked up to 3.924% from 3.821%. Gold settled at 2494.50, up 14.80 or +0.60%. The “fear gauge,” the Cboe’s VIX, fell to 15.23, its lowest close since late July. Crude oil settled at 78.09, up $1.11 or +1.44%. Last but not least, Bitcoin settled at 56,860, down 2,705 or -4.54%.

In the end they have been carrying out the shorts on stretchers. In terms of the ES’s overall tone, it’s been a continuous buy program since Tuesday. In terms of the ES’s overall trade, volume was higher at 1.384 million contracts traded.

Technical Edge

NYSE Breadth: 85% Upside Volume (!)
Nasdaq Breadth: 75% Upside Volume
Advance/Decline: 76% Advance
VIX: ~15.75

Guest Posts

Here are a couple of excerpts from a great Bloomberg piece about buybacks.

Count corporate America as one of the big dip-buyers last week as US stocks fell into their worst correction since October. As the S&P 500 headed for its fourth straight weekly decline, including a 3% drop on Monday, Goldman Sachs Group Inc.’s unit that executes share buybacks for clients saw record orders, with volume spiking to 2.1 times last year’s daily average.

With second-quarter reporting season drawing to a close, firms are emerging from a blackout period for buybacks. Judging by announced plans, their demand is set to stay buoyant. That’s good news to investors big and small who took advantage of the pullback to snap up stocks too.

American firms have declared intentions to buy back $826 billion of their own shares this year, 15% above the planned total at this time last year, data compiled by Birinyi show. Actual buybacks for 2024 will likely exceed $1 trillion, Rubin estimates.

For the first time since at least 2021, investing pros said chief executives should prioritize shareholder returns over capital spending, according to Bank of America’s latest monthly survey. In that poll, 28% of money managers urged companies to boost returns through share buybacks, dividends or debt-financed takeovers — the most since November 2013.

By Lu Wang, Goldman Buyback Desk Flooded With Record Orders Amid Stock Swoon