Our View
We wrote yesterday’s game plan on Monday, but yesterday morning was a time we could have changed the Our Lean section — which read: “you can sell the open or the first rally above and buy the pullbacks or just be patient and buy the pullbacks.”
Instead, we stuck with it and bought weakness. It’s a really good example of why we rarely change the “lean.”
Tuesday’s action — the big rally and drop on Globex, the further drop after the open, and then the big rip in the afternoon — is a perfect example of what the summer markets are going to look like.
Our Lean
The seasonal stats are bullish and it looks like the ES is trying to hold. Today the Fed is going to release the June FOMC minutes, which have been a market mover. While no rate decision is expected, investors hope to get some insight on the Fed’s thinking for future hikes. There’s also the ISM number at 10:00 ET.
Our Lean: I can’t rule out selling early rallies again and buying the drops. Or you can be patient and just buy the pullbacks. That worked wonders yesterday.
3850 to 3860 is the level to crack on the upside. Above it and I’m watching 3900. As for support, watch 3800 to 3810.
Daily Recap
The ES traded up to 3857.75 on Globex and sold off down to 3773.75 and opened Tuesday’s regular session at 3774.25, down over 80 points. After the open, the ES rallied up to 3778.75 and sold off down to 3744 going into 10:00. Which marked the low of the day.
At 10:14, then ES traded up to 3766.25 and then slipped back down to 3745.50 at 11:06. Over the next 40 minutes, the ES back-and-filled and traded up to the 3772.25 level, traded 3763.75 at 12:04, and over the next 2 hours traded all the way up to 3823.75 at 3:15, up 80 points from the low.
The ES dropped down to 3812 at 3:20 and then got hit by a buy program that pushed the futures up to another new high at 3830.75 at 3:48 as the early MIM showed $465 million to buy. The ES traded 3832 as the 3:50 cash imbalance showed $600 million to buy, and traded 3834 on the 4:00 cash close. The ES settled at 3833.75 on the 5:00 futures close, up 6.75 points or 0.18% on the day, but up 90 points or 2.4% from the low.
In the end, I am not surprised at all that the ES tanked, nor am I surprised that it ripped higher — this summer is going to be filled with it! In terms of the ES’s overall tone, it was weak but firmed up. In terms of the ES’s overall trade, volume was steady at 1.9 million contracts traded.
- Daily Range: 113.75 points
- H: 3857.75
- L: 3744
Technical Edge
- NYSE Breadth: 39% Upside Volume
- NASDAQ Breadth: 70% Upside Volume
- VIX: ~$27.50
Tuesday was a damn impressive showing from the bulls. The S&P traded down into support and — to many traders’ surprise — it held!
Now we have some pretty powerful wicks off the 3740 (ES & SPX) area in three straight sessions, showing that bulls may want to run this one higher. At the very least, there’s a line in the sand.
Game Plan: S&P 500 (ES & SPY), Nasdaq (NQ), Bonds, Dollar, GOOGL, AAPL
S&P 500 — ES
Yesterday, I wrote: “On the downside, a break of 3740 puts 3700 in play.”
That 3740 area held just fine on Tuesday and now look at those three beautiful wicks off the 3740 area.
The key focus for Wednesday is 3857.75. That’s yesterday’s high and about where the 21-day moving average comes into play. That moving average was resistance last week, too.
If the ES can clear this level and go daily-up, it could open the door to the 3900 area. Above that is the 3920 to 3950 zone.
On the downside, a move back below 3807 could put the 3740 to 3750 area back in play.
S&P 500 — SPY (Daily and Weekly)
Daily-up over $382 puts the 21-day in play, then potentially $390. Looking a little longer-term, over $390 could put weekly-up in play at $393.16.
On the downside, back below $380 and I would have a little caution in my approach, but really, the SPY looks okay as long as it continues to hold $373 to $374.
Nasdaq — NQ
Man oh man, that 11,350 to 11,380 level was impressive! Now the NQ is flirting with a daily-up rotation over 11,815. If it can clear that and the 21-day moving average, we could have a quick move into the 12,000+ level and the 50-day.
On the downside, I would love to see the NQ hold the 10-day and the Globex low of 11,731.
If it doesn’t, 11,631 is the 50% retrace of yesterday’s range.
Bonds — ZB
If Bonds go weekly-up over 141’11, then we could see a push up to the 144 area.
UUP
All we had to do was be long the dollar — DXY or UUP — over the last 4 to 6 weeks and all would have been fine.
I punched out the last ¼ position I was carrying in the UUP after Tuesday’s move. Bulls who prefer to stay long can continue looking for $28.68+ but as mentioned below on the trade sheets, $28.50 to $28.65 was the next meaningful upside target and that level was achieved.
Cheers.
GOOGL
With an elevated VIX, I have been more drawn to the intermediate-term trades (DG, MCK, UUP, MRK, etc.) but GOOGL caught my eye.
It has its 20-for-1 split later this month, which tends to act as a before-the-event catalyst. Yesterday it had a strong day, rallying to the 50-day.
If there is going to be a bid in the market and in tech, look for a potential daily-up over $2,267.50. If GOOGL can do that — and sustain above this level, not just a “look above” it — then we could see a potential move into the $2,360s.
AAPL
I’m looking at AAPL as more of a short-term lotto situation if there is a bid in tech today/tomorrow.
Daily-up over $141.61 that sticks (again, not just a “look above”) opens the door to ~$143.50, last week’s high. Above that could put $145 to $146 in play.
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.
Trade Sheets:
- DXY / UUP — “$28.50 to $28.65 is the next meaningful upside target.” and it was finally achieved on Tuesday.
- MCK — We have hit two trim zones so far on MCK. Feel free to cash the last ⅓ of the position as you see fit. $335 to $340 is a potential upside target if it continues higher. Moving stop-loss up to $315
- DG — Trim and raise stops → “If this stock sees $250 to $252 today, I will be out of ½ and looking for $256 for the second tranche and $260 to $262 for the last portion.”
- That is still the plan → ¼ at $255 to $256 & ¼ at $260 to $262
- MRK — Looking for $93 to $93.50 as the first upside target. Using $90 as my stop. → came within 5 cents of the first upside target on Tuesday (close enough for me, but we’ll see how it trades today)
- $94 to $95 as second target
- $90 Stop Loss. Conservative bulls can go to a B/E stop.
Relative strength leaders (List is cleaned up and shorter!) →
- DLTR — just went monthly up.
- BMY
- MRK
- ABBV
- UNH
- JNJ
- XLE — 200-day is getting close.
- CLR
- VRTX
- DG
- IBM
- MCK
Economic Calendar
As we all know, there’s no crystal ball when it comes to trading stocks, options, or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk-free for 30 days.
As we all know, there’s no crystal ball when it comes to trading stocks, options, or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk-free for 30 days.
Comments are closed