Bonds Rally, but Can Stocks Continue Higher?

IPO, M&A markets have a pulse

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Our View

US CTA’s (commodity trading advisors) are short $47 billion of equities after selling $88 billion over the last 15 sessions. This is why there has been such a big bid in the ES over the last few days. Bonds have also been coming back to life — meaning bond yields are under pressure — helping to give stocks a boost.

Elsewhere, Exxon (XOM) confirmed it will buy Pioneer Natural Resources (PXD) in a $59.50 billion all-stock deal. Doing so to create a shale giant, the deal is Exxon’s largest since its merger with Mobil in the late 1990s. Birkenstock priced its IPO at $46, giving it a $9 billion valuation.

So what? We’re seeing a little life come back into the IPO and M&A markets.

Don’t forget, we have the PPI number before the open and the Fed’s FOMC release this afternoon at 2:00 p.m. ET.

Our Lean

I don’t doubt the ES can go higher, but after a 3-day 177-point rally and the failure above 4400, I don’t think it will go up as much or be as strong. Keep in mind, the 50% “halfback” is ~4416.

I want to remind everyone that a call of selling the rallies and buying the pullbacks is a bullish bias and buying the early weakness and selling the rallies is a bearish bias.

As you know, the ES tends to go in both directions but clearly the trend has been up the last few days. Should the ES gap higher today and is within yesterday’s trading range — yesterday’s high is 4419 — I plan on selling the open or the first rally above and buying the 30 to 40 point pull backs paying close attention to @HandelStats levels that have been excellent.

Upside: Trade and hourly close above 4405 targets 4412.48, then 1 sd at 4424.38. Hourly close above there targets 4435.50. Hourly close above there targets 2 sd at 4459.82.

Downside: Trade below 4405 targets 4399.25, then 4393.50. Hourly close below 4392 targets 4383.25, then 4367.50. Hourly close below there targets -1 sd at 4358.09. Hourly close below there targets 4339, then -2 sd at 4324.18.

MiM and Daily Recap

This was a post I made in the MrTopStep chart before the open; IMPRO: Dboy :(8:54:41 AM) : 4400 Turn Around Tuesday for #TD

The ES traded up to 4381.00 on Globex and opened Tuesday’s regular session at 4376.00. After the open, the ES traded 4372.00 at 9:31, back-and-filled from the 4271 to 4379 until 9:58 when several buy programs hit, pushing the ES all the way up to 4403.50 at 10:40. Afterwards, it made six new highs: 4409.50 at 11:08, 4413.25 at 11:20. 4413.50 at 11:36, 4416.25 at 11:48, 4428.00 at 12:01, and the high at 4319.00 at 12:12. After the high, the ES down-ticked to the 4312.50 level at 12:52, and in one bar the ES dropped 17 points down to 4398.00 at 1:06.

From there, it rallied up to 4404.00, dropped down to the VWAP at 4393.00, had some sideways-to-up price action up to 4403.50 at 1:50, traded down to 4391.25 and rallied back up to 4404.00 at 2:49. From there it fell back down to 4389.25 at 2:57, rebounded to 4398.25 and traded in a 3- to 5-point range until the ES traded 4396.50 as the 3:50 imbalance showed $560 million to sell and traded 4391.50 on the 4:00 cash close. It traded the same level — 4391.50 — on the 5:00 futures close, up 22.75 points or up +0.52% on the day.

In the end, there was zero selling in the first part of the day and a grind lower late in the day. In terms of the ES’s overall tone, it was firm all day. In terms of the ES’s overall trade, volume was lower: 246k traded on Globex and 1.288 traded on the day session for a total of 1.534 million contracts traded.

Technical Edge

ES

The bulls have been in firm control of the S&P over the last week or so.

NQ

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!