Bulls Need Apple to Stabilize If They Want a Rally

There’s a ‘buy the dips’ feeling to the day

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Our View

I know some of you don’t believe in some of the trading rules we post, but the amount of times that they have worked vs. not working is enough for me to be a believer. For the record, no rule works 100% of the time, but I think Thursdays are a turning point for the FRYday expirations.

I also think this has a lot to do with the CMEs span system that kicks out margin calls. Allow me to explain.

When the PitBull was short calls and they were trading for .20 or .30 cents (basically worthless vs. his basis) he would get a margin call, and instead of sending in more money he would just take the positions off to raise cash in his account. It would really piss him off and he would say it was the CMEs way of screwing the customer into making more trades/volume on a position that was literally worthless. This is just one part of the “Thursday effect” but a very valid one.

Throw in the 0DTE volume and the Thursday/Friday low the week before the monthly opex and you get a rule that actually works pretty well.

Our Lean

Our Lean is simple, short and sweet.

Unless there is some major headline that disrupts the indices negatively, my gut tells me to buy weakness.

Based on the close, I think it’s a “buy the pullbacks” kinda tape, but that doesn’t mean there won’t be some rips to sell for the in-and-out type of traders.

Oh and one last thing: Keep an eye on Apple! This stock tumbled 6.4% over the last two days, wiping $190 billion from its market cap. At yesterday’s low, AAPL was down 8.65% from its Tuesday high. It’s the largest holding in the S&P, so you have to know what it’s doing when it’s making big moves.

As for levels, 4432 is key for me, followed by 4406 to 4410. On the upside, keep an eye on 4458 to 4460, 4473 and 4486. (I am still trading the September contract).

MiM and Daily Recap

The ES sold off down to 4434.75 going into 9:00 a.m. on Globex and opened Thursday’s regular session at 4438. After the open, the ES traded down to 4434.75 and then rallied up to 4451, sold off down to a new low at 4434.25 at 10:35 and then rallied up to 4453.50 at 10:48. From there, it pulled back to the VWAP at 4445.75, made another new high at 4457 at 11:40, pulled back to the 4445.50 level and bounced up to 4459.25. After the high, the ES pulled back to the 4453.75 level and then rallied up to 4460.50 at 2:03. Below are some of my posts from early in the day:

As you can see in the recap above, the ES made a high at 4457 at 11:40.

After the 4460.50 high, the ES pulled back down to the 4447.75 level at 2:36 and traded above the VWAP and between the 4450 to 4457 area until the 3:50 imbalance showed $3.2 billion to buy and traded up to 4463, before dropping down to the 4452.50 level at 3:57. The ES traded 4455.25 on the 4:00 cash close and after 4:00, it traded back up to the 4458 level and settled at 4457.25, down 12.5 points or -0.28% on the day.

In the end, the first part of the day was all about catching the sellers off base, too short. In terms of the ES’s overall tone, it shook off the early weakness but the NQ somewhat dominated the tape. In terms of the Ess overall trade, volume was lower, 257k traded on Globex and 1.186 million traded on the day session for a total of 1.433 million contracts traded.

Technical Edge

ES — September Contracts

Really needs to take out the ~4470 area to gain momentum.

NQ — September Contracts

Need Apple to stabilize.

Open Positions

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!