Today’s inflation report can move the needle.
Follow @MrTopStep and @BretKenwell on Twitter and please share if you find our work valuable.
Don’t Forget: The Long-term performance of the S&P 500, some longer-term setups, and 5 red flags that showed up before the 2022 bear market.
Our View
Yesterday’s “Our Lean” worked well:
Our Lean: Today we are keeping it simple and are looking to buy the pullbacks. I think a 2 or 3-day rally is coming. [Wednesday’s] “pause day” will either hold and rotate to the upside or fail and we’ll know fairly quickly. Currently, it looks like the S&P will try to rotate to the upside.
However, it seemed like Friday’s PPI report was hanging over the ES. Bulls seemed nervous to bid up the ES too high.
As we all know, the S&P hates uncertainty and PPI fits the bill. So does next Tuesday’s pre-market CPI report and Wednesday’s FOMC meeting (although the market is pricing in a 50 bps hike).
The NQ — which was very oversold — came to life yesterday, although it wasn’t immune to some pukes. I get the feeling that a lot of traders are positioning for another leg up, but I gotta be honest, I have no idea if the next 100 points are up or down. If I had a gun to my head I think we pop, but so does everyone else.
It’s been a very choppy couple of days and like Bret noted yesterday, it feels very “binary” to me. Bullish results from the Fed and CPI print could get us back the recent highs. Bearish results and support will likely give out.
Obvious? Yes. Predictable? No. Frustrating as it is, it’s true.
Our Lean — Danny’s Take
I have said it before and I’ll say it again. I want to do a webinar just for the paid subs. An impromptu with just a few charts and discuss my 2022 predictions and what I think for 2023 and I want to hear your views.
I also want to thank all of you for being part of the Opening Print. It is a 29-year love of life.
At times, I thought maybe I should have moved on and given it up. However, I also think it’s part of who I am. I’d love to do a little Q&A with all of you. Some of you are new to the OP, but many others have been riding with us for years — decades even — and for that, we’re very, very grateful.
Our Lean: I’m tempted to take a shot on the long side before the PPI is released, but that seems like a recluse way to go — it would be a gamble, pure and simple.
The only way to gamble is a small percentage in calls or puts. That way, the risk is simply the price paid for the options.
I think the Fed is looking at slower inflation numbers, but I also think it’s going to be temporary. And if the ES does go down, @realTraderdave wants to buy option lottos late Friday if the ES is weak.
MiM and Daily Recap
The ES traded up to 3954 and sold off down to 3914 on Globex, then opened The ES traded up to 3965.75 on Globex and opened Thursday’s regular session at 3954.75. After the open the ES sold off down to 3937.75 at 9:45 and then rallied up to 3977.25 at 10:37.
The ES then traded down to a higher low at 3953.50 at 11:19, then traded up to a lower high at 3972.50 at 1:44. Then it quickly dropped 28 handles down to 3948.50 at 2:07. The ES traded 3957 as the 3:50 cash imbalance showed $1.03 billion to sell.
On the 4:00 cash close, the ES traded 3967 and settled at 3964.25 on the 5:00 futures close, up 29.75 points or +0.76% on the day.
In the end, the index markets rallied, but they also had some decent intraday rug-pulls. In terms of the ES’s overall tone, the ES closed higher but felt like it was part of a buy NQ/sell ES rotation. In terms of the ES’s overall trade, volume was steady at 1.66 million contracts traded.
Technical Edge
- NYSE Breadth: 63% Upside Volume
- Advance/Decline: 55% Advance
- VIX: ~$22.25
We have not had too much action on the indices for us, although yesterday’s move was a nice “rally out of that pocket of support.” Instead, our individual positions have been doing the heavy lifting.
Let’s keep today light as a result and just look at the S&P and the bonds.
S&P 500 — ES
Yesterday’s action came within 3 points of our 3980 to 3985 target range and that’s good enough for us.
The ES popped on the Globex open and was pushing higher. That’s had it hitting our secondary price targets from yesterday — 4010 to 4015.
Here’s the thing, though.
But now we’re getting the reaction from the PPI number which came in higher than expected (which is bad).
ES — Zoomed In
After the PPI dip, a few things have occurred. First, the gap has been filled. Second, the ES found its footing on the 15-min 200-sma and given us a low of 3959.75 to work with.
Already up 20 to 25 handles, let’s see how this area acts if it’s retested. Can we get some sort of break of 3960 and then a reclaim and bounce — AKA a reversal?
Or do we get below and stay below 3960, potentially opening the door down to the 3935 to 3940 area?
On the upside, 4000 is a key pivot, followed by the 4020 to 4025 area and the Globex high.
SPY
As for the SPY, it went daily-up over $395.64 and gave us our $397 target. Nothing to brag about — $1.50 a share — but some decent pocket change going into Friday.
Try to keep it simple with the SPY. Above the 10-day (and yesterday’s No. 2 target of $398.50) opens the door to $400, then $403. The latter is a big level for bulls to recover.
On the downside, the $392.50 to $393 is key. Below it and $390 is in play as a vital level.
SPY — 4-Hour Look
More of just an interesting look here than a trade. But notice how the SPX and SPY are trapped below the 10-ema, but are holding above last week’s low (the dashed line) and the 200-sma.
A break of either of these levels can create a continuation in the respective direction.
TLT
We’ve run the register twice on TLT over the last couple of weeks. Yesterday gave us an inside day after that gap-up on Wednesday.
A break of yesterday’s low at $108.47 could create an inside-and-down rotation, putting the 10-day back in play. If we see that today — and I don’t think we will — it may be worth a small long position.
Open Positions —
- Numbered are the trades that are open.
- Bold are the trades with recent updates.
- Italics show means the trade is closed.
- TLT — Trimmed down to our final ¼ or ⅓ at $108.50. A complete exit is okay too. Those still holding can fish for the $110 to $111.50 area.
- IBM — Daily-up over $147.17 was the entry. $145.50 is our stop. Trimmed ⅓ at $149.50+ (pre-market is fine). Ideally down to ½ if we see new highs over $150.50.
- Stop at $145.50 or B/E for less aggressive traders (B/E Stop hit)
- CEG — Trimmed ⅓ at $93. Raise stops from $86 to $89. Looking for $95 to $96 for small trim (down to ½). Down to ⅓ if we see $97.50+
- Ulta — Booyah! Down to ½ or ⅓ here — likely ⅓ as per yesterday’s update. I’d love to see $488 on the remainder.
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
Relative strength leaders →
- LNG
- CAH
- Retail — TJX, WMT, ULTA
- SBUX
- DE
- CCRN
- AMGN
- MET
- GIS
- REGN
- CI
- MCD
- ENPH, FSLR — solar has strength
- VRTX
- UNH
- MRK
- XLE — XOM, CVX, COP, BP, EOG, PXD (Weekly Charts)
Economic Calendar
