The S&P needs to hold this level for bulls to remain in control.

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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

While much of the headlines were dominated by Ukraine and Russia, the real story was German authorities are stepping up preparations for emergency cash deliveries in case of a blackout to keep the economy running. That’s as the nation braces for possible power cuts arising from the war in Ukraine. Despite a consensus at the G20 for Putin to get out of Ukraine and stop threatening the use of nuclear weapons, he continues to attack the power grid. 

I have said for months that the people of Ukraine will freeze to death over the winter and that it’s going to spread throughout Europe. The German story about hoarding cash to pay for energy costs is all part of Putin’s playbook. He can’t win on the ground so his plan is to destroy the country.

Geopolitical news continues to dominate the headlines, and when it’s something like a Russian rocket landing in Poland, the algos are surely going to take the S&P for a ride. 

Our Lean — Danny’s Take

We all know how the S&P hates uncertainty and I believe this winter will be full of it. That said, remember our Thursday/Friday rule. 

Or more specifically, we have to go with the PitBull’s trading rule that if the ES is weak late in the day on Thursday, you buy some cheap calls for Friday’s November options expiration. 

According to the Stock Trader’s Almanac, the week before Thanksgiving has the Dow up 19 out of the last 28 occasions — about 68% of the time — but down the last 4. And Friday’s November options expiration has the Dow up 14 of the last 19 (73.6%). 

I’m also going to add the Ned Davis S&P and Nasdaq cash study for you to review (found here — and please do not share this document). 

Our Lean: ES support has been coming into play in the 3950 to 3960 area. Below this area puts a big test of 3920 in play. Below are some levels I will be paying attention to:

Resistance: 4050.75 (major), 4023.50 (minor), and 4012 (minor).

Support: 3960 (breaking now), 3936.25, 3923. Session containment is at 3903.75. 

Below that and 3884 and 3867 are noted on my screens. 

MiM and Daily Recap

UpDownNet Flow
Last 20 Sessions173$22.1 Billion
Last 1091$13.88 Billion
Last 541$9.05 Billion

The Nasdaq led the S&P lower yesterday in a low-volume grind to the downside. The S&P had a total trading range of ~54 points. At 3:50, the ES traded 3971 as the 3:50 cash imbalance showed $3 billion to buy. It traded 3969.50 on the 4:00 cash close and settled at 3974 on the 5:00 futures close, up/down 31 points or 0.78% on the day. 

In the end, it was another day of low-volume chop. In terms of the ES’s overall tone, it was weakish but held at its lower support band at the 3960 level. In terms of the day’s overall trade, volume was low at 1.44 million contracts traded. While Retail sales rose to a seasonally adjusted 1.3% in October compared with September, it’s unlikely to sway the Fed from slowing its rate hikes.

Technical Edge

  • NYSE Breadth: 16% Upside Volume (!)
  • Advance/Decline: 34% Advance 
  • VIX: ~$24.50

We were able to book some gains in CCRN and TLT yesterday, as bonds continue to trade pretty well. Both positions will move to a breakeven or better stop-loss now to prevent any of our gains from turning into outright losses. 

I will keep today’s note short for the futures traders, as the level we have been talking about all week is coming into play. I will try to be back with a few other setups later this morning. 

S&P 500 — ES 

This is the test we have been talking about all week: 3920. 

This level has been a key support/resistance pivot for months now and it’s also where the October high comes into play (at 3924.25) and where the 10-day ema comes into play (currently near 3915).

This is the test for the bulls to prove they have active control of the S&P. 

If we catch a bounce from this area, I’d love to trim in the 3950 to 3960 area, which was prior support that failed during Globex.  

SPY — Daily

SPY, same thing. 

The $390 level has been glaring — almost too obvious. 

Bulls need to hold this area for longs to maintain active control of the SPY. 

Like any trade, keep your position size reasonable and always prepare for a possible loss. That said, this is reasonable R/R spot for the bulls who have been patiently waiting all week. 

Go-To Watchlist

*Feel free to build your own trades off these relative strength leaders*

  • Numbered are the trades that are open. g
  • Bold are the trades with recent updates. 
  • Italics show means the trade is closed.

Open Positions

  1. TLT — Trimmed into the $100s yesterday. Should be down to ½ or ⅔ positions from here. If it’s got real strength, it will hold $100 as support, and push into $104 to $105 next. B/e or better stop. 
  2. CCRN — traded $34-and-change and a reasonable target. Trim on any new high over Wednesday’s high if you did not trim yesterday. $34 to $35 ideally
    1. Personally using $31.50 as my stop (up about $1.10 from my basis).

Relative strength leaders →

  1. LNG 
  2. CAH 
  3. TJX — new highs
  4. SBUX
  5. AMGN
  • CCRN
  • REGN
  • CI
  • MCD
  • ENPH, FSLR — solar has strength 
  • VRTX
  • UNH
  • MRK
  • XLE — XOM, CVX, COP, BP, EOG, PXD
  • SBUX

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.
Disclaimer: Charts and analyses are for discussion and education purposes only. I am not a financial advisor, do not give financial advice, and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!

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