Danny’s View: The Opening Print Recap
When Jerome Powell held the line on the Fed’s taper and interest-rate hike schedule — and with knowing several central banks pushing up their timetable for rate hikes — do you think he knew Non-farm payrolls were going to increase to 531,000 in October? I think he did!
Going into Friday’s jobs report, the ES was already up 15 of the last 17 sessions, were up 12 points before the jobs number and opened at 4698.25, up 25 handles on the day, and rallied straight up to 4711.75 at 10:07. After the ES did what it’s done after every RIP recently, it back-and-filled in a narrow range, this one lasting until 11:45 when a few small sell programs hit, pushing the futures down to 4697.50.
After a few rally attempts just above the VWAP at 4698.25, the ES sold off down to 4685.75 at 1:18, rallied up to 4689.25, and dropped down to 4674.25 at 1:30. After the low, the ES made a few higher lows and then short-covered up to the 4692-93 area before falling into a back-and-fill pattern.
A 3:00 sell program hit the ES, pushing it down to the 4685 area and then rallied right back up to 4696.75 at 3:36 as the early MIM ‘flipped’ from $100 million to buy to $96 million to sell. The ES sold back down to 4689.50 as the final 3:50 MIM reading came through and traded 4690 on the 4:00 cash close. After 4:00, the ES chopped around on low volume and settled at 4685.75 on the 5:00 futures close, up 12.25 points or 0.26% on the day.
In the End
In the end, it’s been an amazing run. The ES has rallied over 450 points since the beginning of October and is up about 100 points so far in November. Friday was the first 37.50 point drop from a new high in what feels like forever.
In terms of the ES’s overall tone, it was very firm early but weakened slightly late in the day. In terms of the ES’s overall trade, total volume was 1.46 million contracts traded.
Our View — The Week Ahead
I told the MrTopStep chat room on Thursday that the “next 40 points were down.”
I was a day early.
Sometimes the pullbacks off a high are 10 or 15 points, sometimes they are 40. Less often is 100 points or more, but they do happen. During the current rally, pullbacks have been slight. As I have said, one of the hardest trades you can make is trying to call a top. Generally, that’s not what I do, but I felt strongly after Friday’s early jobs rally that we would pull back and we did. Further, overnight inventory was 100% net long, so that increased the odds of a post-open dip.
I will be 100% honest: I have no idea whether this downtick will last two hours or two days — no one does — but I do feel like the ES is long overdue for some type of constructive back-and-fill pullback, especially with the ES up 16 of the last 18 sessions. And keep in mind, one of those so-called “down days” was a loss of just 5.25 points or 0.12%. Most would consider that flat.
Our Lean
I’m testing the waters. My Current position is short at 4712.50 and I am hoping we see some further weakness today. If the ES gets down to the 4665 area, I will cover half the position and use a breakeven stop on the balance. I know it’s going against the grain, but I will not be sticking around very long and ideally would like to buy weakness later in the week.
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.
Technical Breakdown — Some Notable Observations
Danny’s setup is the quintessential way to approach the mega run in the ES. He’s looking to scrape some points out on the downside, which if attempting to do, is much better to do after an extended run and as the ES is wobbling vs. shorting into the early part of a monster move.
Even better is his plan to take profit and move to a breakeven stop-loss. If it hits, he gets to put some coin in his pocket and leaves a “risk-free” trade in play that lets him ride more downside should it come.
The ES is getting close to our first target of the 161.8% extension near 4728. With a high of ~4711, that may have to be close enough for now. We’ll see if the bulls come to play earlier in the week. On a dip, I want to see how the ES handles the 8- and 10-day moving averages. Below puts 4550 on the table. I don’t want to sound like a broken record, but oftentimes keeping it simple is best and our approach has worked thus far.
The NQ has a similar setup to the ES, which is up impressively from the October lows and is approaching our 161.8% extension target near 16,540. There is a bit more risk with this one, though.
That comes as the NQ faded hard from its highs on Friday and failed to hold the prior day’s high. That gives us a bit of an evening star formation for the chartists. In reality, its failure to hold Thursday’s high is a bit of a concern, but if it loses Friday’s low then it turns from a yellow-flag situation to a red-flag situation.
That’s at 16,292 and the NQ already lost this level in Globex before recovering it. Keep an eye on that mark. Below it could give us a “cute” short back to the 8/10-day moving average area, or for those that don’t like shorting in uptrends, it can give them pause to buy the dip.
Tesla
Let’s not bother dissecting the “why” portion of Elon Musk’s Twitter poll asking the public if he should sell 10% of his holdings. Instead, let’s stay focused on the charts.
Shares fell as much as 7.5% in pre-market trading, bottoming at $1,130.50 and rallying off those lows. Earlier I mentioned being “a broken record” and that was due to my insistence of the 8/10-day moving averages.
Well, look at where Tesla bottomed this morning: Right at the 10-day moving average.
Shares are now up more than $37 apiece from the pre-market lows. That doesn’t mean that it won’t go lower, but it shows the importance of this trending moving average. Let’s see if this area supports the stock or if TSLA breaks this trending mark and finally takes a break.
A regular-hours test of the 10-day could set us up for a decent trade after the open.
Economic Calendar
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!
Comments are closed