Can Bulls Stay in Control Into Month-End?

Fed delivers what the bulls wanted

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Our View

Because the markets had rallied so hard from the August 5th low, everyone seemingly thought the rug was going to be pulled out from underneath them on Friday after Powell’s 10 a.m. remarks.

Instead, he delivered what investors had been hoping for: Certainty on whether the Fed would begin cutting interest rates. With rate cuts now in the bag, the S&P 500 is hovering within 1% of its all-time high.

What’s not hovering near record highs though? The Nasdaq 100, which is still down 4.6% from its all-time high in July. Remember, that’s when the Great Rotation began, with the S&P continuing to new highs into mid-July after the Nasdaq had already topped out earlier in the month.

Now the S&P 500 has recovered almost all of its losses, and while the Nasdaq hasn’t necessarily done bad, it’s clearly lagging. We’ll see if that’s still the case after Nvidia reports earnings on Wednesday after the close. Just like the S&P ahead of Powell, I wonder if too many people are expecting a pullback for Nvidia after the event, setting up more potential upside.

If that’s the case, Nvidia could be the spark that the Nasdaq needs to regain momentum vs. the other indices.

Our Lean

While we may be due for a bit of rest/consolidation, the strength and breadth of the market is undeniable: The bulls have all the momentum. There is a lot going on in the world, but the S&P doesn’t seem to care — at least right now. While September has been the worst month for stocks over the last decade, it doesn’t mean we can’t finish August on a high note.

Our Lean: Whether you agree with the rate cuts or not, it doesn’t matter — they are coming — and I’m not here to fight city hall. Today I’m looking to ride the move higher and am a buyer of the 20 to 30 point dips.

MrTopStep Levels:

How to use MTS levels

MiM and Daily Recap

The ES traded up to 5630.25 on Globex and opened Friday’s regular session at 5626.00. After the open, the ES traded 5627.00, sold off down to 5618.75, and then rallied 43.5 points to 5662.25 by 10:15. After the high, the ES dropped 48 points to 5614.25 at 10:54, and then rallied 41.75 points to a lower high of 5656.00.

Following this high, the ES dropped 45.75 points to 5610.25, then rallied back up to 5625.75 before dropping to a new low of 5603.00 at 12:48. After this low, the ES rallied 37.75 points to 5640.75, pulled back to 5632.00 at 1:57, and then rallied back up to 5642.75 at 2:48. It then sold off to 5632.25 at 3:03, rallied to 5649.00 at 3:21, pulled back slightly, and started going bid. It traded 5647.75 as the 3:50 cash imbalance showed $2.3 billion to buy, and then shot up to 5657.75 at 3:56, finally trading 5651.50 at the 4:00 cash close.

In the end, the ES and NQ performed nicely, up 1.05% and 1.09%, respectively. In terms of the ES’s overall tone, there was some more of the NQ selling that weighed on the ES at times, but ultimately both finished strong on the day. In terms of the ES’s overall trade, volume was steady at 1.35 million contracts, just slightly ahead of Thursday’s tally and the highest daily volume since Aug. 15.