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Our View
The action lately has not been very promising for the bulls. Every rally is being sold and each up-move is getting erased. The S&P 500 has now fallen in three straight sessions, shedding 252 or 6% in that span.
Given the performance, we’re likely due for some kind of bounce — but how strong will it be?
Lately, the pattern has been to sell the 40 and 50-point rallies. We rallied about 53 points from yesterday’s low to the overnight high and have since seen a 40-point dip (again, all during Globex).
We’ll get into the specific levels in a minute, but generally speaking, the market appears to be at a make-or-break spot. If the S&P can’t hold this 4,000 area, we could be looking at a much bigger dip as we get into the more volatile months of September and October.
The Fed not only doesn’t have our back but it’s an active headwind at the moment too. That has to factor into investors’ minds at some point.
Our Lean
For now, they are selling the 40 to 50-point rallies. I would love a relief rally into the 4100 area, but the 4060 to 4070 area has also been resistance lately. Consider that Friday’s close was 4059.50, while the high on Monday and Tuesday was 4064 and 4072.75, respectively.
That’s a lot of supply building up there and if we see a rally that far today — 100 points off yesterday’s low — look to see if it stalls.
Amid it all (and despite the bearish-ness) we must keep in mind that the ES and NQ are now down in three straight weeks and have retracted roughly 50% of the rally. That’s why we’re in such a tough spot now; the short-term trend is down, but we’re at a point where there should be some decent support.
Our Lean: Look for support from the 3980 to 4000 area in the ES and sell the big rallies. 4020 to 4030 is short-term resistance, followed by 4060 to 4070, then 4090 to 4100.
Daily Recap
- Daily Range: 108.25 points
- H: 4072.75
- L: 3964.50
Technical Edge
- NYSE Breadth: 18% Upside Volume (!)
- NASDAQ Breadth: 29% Upside Volume
- VIX: ~$26.25
Game Plan: S&P, Nasdaq, Individual Stocks
S&P 500 — ES
The ES puked right out of the gate yesterday, losing 4000 in the opening hour, and then was rejected by this level. Also, notice the way it was rejected in back-to-back sessions by the 10-week moving average.
There are some disturbing developments on the charts in this regard. However, 3980 to 4000 is key.
There we have the 50-day moving average, 50% retracement, and the anchored VWAP to the 2022 low. Again — this zone is key.
On a rebound, we have to see how the 4060 to 4070 zone is handled. That’s been resistance for the last two days and is the underside of the 10-week. If we push through it, the 4090 to 4120 zone is in play. For now, I expect this area to be resistance.
On the downside, a break of yesterday’s low at 3964.50 and failure to reclaim it really puts the bulls in a tough spot.
SPY
The SPY is a similar situation, as it leans on the $397 to $400 area. For now, this zone is holding.
If it fails, $390 is back on the table, which was a prior resistance zone turned support in July.
If the SPY reclaims $400, look for a potential move up to the $404 to $406 zone. Above that puts $408 to $410 in play. The bulls really cannot regain momentum until the SPY reclaims $411.
Nasdaq — NQ
The ES and the NQ are flirting with trouble, as this 50-day/50% retrace/VWAP zone is not generating the type of bounce bulls want to see.
We could rally into the NFP report on Friday, but unless the NQ clears the 12,600 to 12,850 zone, the rallies are a sell.
A break of yesterday’s low (12,447) that isn’t reclaimed puts 12,100 to 12,200 in play.
LNG
We have had a nice trade in LNG before and with the amount of LNG (liquified natural gas) they are exporting, Cheniere is one to keep an eye on. I am looking for a possible correction to the $150 area.
In that zone we find the breakout area, as well as the 10-week and potentially the 50-day moving averages.
CNC
Flagged this one yesterday as it gave us back-to-back range days. Yesterday was an inside day. A move over $92.20 could put the 10-day in play, followed by $94 to $95.
$88.75 is a reasonable stop if a long position triggers on the rotation higher.
Go-To Watchlist — Individual Stocks
*Feel free to build your own trades off these relative strength leaders*
- Numbered are the ones I’m watching most closely.
- Bold are the trades with recent updates.
- Italics show means the trade is closed.
For those that want to preserve their gains, feel free to exit any position below, as many are a ½ positions or less.
- UUP — Down to ¼ position as we hold for potentially higher prices. Raise stops to $28.40 to $28.50. Look for $30 on the last piece.
- CHNG — second target of $25 hit. Now down to just ⅓ position. Take all profit here or move to a B/E stop and look for $25.50.
- Still looking for $25.50 on the upside, but can be back up to a ½ position or more $24.73. $24.25 is a reasonable stop-loss for those that added.
- AR — Out ⅔ of position after hitting our second target at $44. B/E stop — stopped at Breakeven
- OXY — I like the look here. If we bounce, I’m looking for $75 to $76 as our first trim spot. On the downside, I actually like this one a dip down to $66-ish. So consider leaving room to add.
Relative strength leaders (List is cleaned up and shorter!) →
- XLU
- XLE
- OXY
- CNC
- F
- BMRN
- APLS
- ENPH
- TAN
- FSLR
- LNG
- PWR
- CHNG
- CELH
- COST
- UNH
Economic Calendar
More Fed speak:
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