Can This Rally Hold Without a Larger Pullback? Doubtful

Nasdaq up 8 straight.

Follow @MrTopStep on Twitter and please share if you find our work valuable!

Our View

Since Israeli troops entered Gaza, the Nasdaq has closed higher eight sessions in a row for a total gain of 1,272 points or 9% — and its longest streak in two years.

The tech-heavy index is now up 30% on the year. The ES and the YM have gained in seven straight sessions, pushing the S&P up 14% on the year. I called for the bounce, but I also didn’t think the markets would rally so much so fast without any real pullbacks.

MSFT is at a multi-month high, Apple’s out of the graveyard, Nvidia’s up almost $70 or 17.8% from its low last Tuesday.

All the big tech names are ripping and you know why? Because the low is in for bonds, yields are going to fall sharply and stocks are going to rally another 10% to 13% by the end of the year. Or at least, that seems to be the mindset right now.

I was long the ES from the 4158 level and got out with a 65-point profit, and despite my scalp trades making money, I left a lot of money on the table. I had it and I didn’t hold.

Our Lean

I should kick myself — I didn’t follow Turnaround Tuesday. Nor did I use the PitBull’s rule about the ES rallying early in the day and early in the week. I also was not following my own rule about not fighting city hall.

That all said, my lean is to sell the early rallies and buy the pullbacks, which could be 30- to 50-points.

It’s been the same pattern: Rally, drop on the close (profit taking), selloff a little on Globex, then catch a bid and rally, gap higher on the open, rally, pullback and rally again sometime around midday, have another pullback to buy, then it starts all over again. Can this rally hold without any larger pullbacks? I doubt it.

For those of you who like HandelStats levels, here they are:

Upside: Trade above 4398 targets 4403.38, hourly close above there targets 1 sd at 4423.96. Hourly close above there targets 4427, then 4431.26, then 4435.50. Hourly close above there targets 4443.43.
- ***Hourly/Daily close above there likey goes to 4471.93***. There are 2 levels in between 2 sd, 4452.42 and 4460.50, then 4471.93.
Downside: Trade and hourly close below 4392.75 targets 4388.51, then 4383.38. Hourly close below there targets 4374. Hourly close below there targets -1 sd at 4367.04. Hourly close below there targets 4355.25. Hourly close below there targets -2 sd at 4338.58, then 4332.

MiM and Daily Recap

ES and NQ recap

The ES traded down to 4366.00 on Globex and opened Tuesday’s regular session at 4384.00. After the open, the ES traded up to 4385.00, pulled back to 4372.25 at 9:41, and then traded up to a new high at 4397.00 at 10:06. It then rallied up to 4402.50 at 11:45, pulled back to the VWAP at 4385.75 and then traded up to 4402.00 at 2:37. After the push, the ES sold off down to 4393.50 at 3:15 and then bounced back up to a new high at 4403.25 at 3:47 as the early NYSE imbalance showed $519 million to sell.

The ES traded 4400.25 as the 3:50 cash imbalance showed about $1 billion to sell, sold off down to 4389.50 at 3:56 and traded 4396.50 on the 4:00 cash close. After 4:00, the ES traded up to 4397.75 and settled at 4397.50 on the 5:00 futures close, up 17.25 points or 0.39% on the day.

In the end, it was a buy-the-pullbacks kind of day. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was low: 220k traded on Globex and 1.094 million traded on the day session for a total of 1.314 million contracts traded.

Technical Edge

NYSE Breadth: 41% Upside Volume
Nasdaq Breadth: 60% Upside Volume
Advance/Decline: 42% Advance
- Last week: Back-to-back 80/80 days for A/D and NYSE Breadth
VIX: ~15

ES

Levels from HandelStats.com

Daily ES

Upside: Trade above 4398 targets 4403.38, hourly close above there targets 1 sd at 4423.96. Hourly close above there targets 4427, then 4431.26, then 4435.50. Hourly close above there targets 4443.43.
- ***Hourly/Daily close above there likey goes to 4471.93***. There are 2 levels in between 2 sd, 4452.42 and 4460.50, then 4471.93.
Downside: Trade and hourly close below 4392.75 targets 4388.51, then 4383.38. Hourly close below there targets 4374. Hourly close below there targets -1 sd at 4367.04. Hourly close below there targets 4355.25. Hourly close below there targets -2 sd at 4338.58, then 4332.

NQ

Daily NQ

Upside: Trade above 15376.62 targets 15435.50. Hourly close above there targets 15477.77, then 1 sd at 15501.53. Hourly close above there targets 15546.62. Hourly close above there targets 15651.14, hourly close above there targets 115710.25.
Downside: Trade and hourly close below 15358.50 targets 15282, hourly close below there targets -1 sd at 15235.43. Below there targets 15223, then 15179.25. Houry close below there targets -2 sd at 15096.86.