Our View
I may not like the markets, but I can’t deny how resilient they are. I never know what the premium readers think of the OP, but I personally think it’s been a good guide to following the price action.
I know there are people that understand economics better than me, but like I have always said, I am the market feel and market flow guy. I am trying to do what I did for the PitBull and my other S&P desk customers on the CME floor.
Speaking of the PitBull, yesterday I reminded him that there’s no way to catch every headline, economic reading, earnings report, Fed headline and all the global stuff going on. It’s just impossible, but it shouldn’t matter. Having the right directional ideas can be a big help and following the price action is the No. 1 tell.
I know I am not always right, but I don’t know anyone that is.
Our Lean
After a three-week rally, the ES finally traded above 4000 — but it was not a great close yesterday.
The question is, where does it go from here?
The ES is entering a big area of resistance at the 4010 to 4040 area. I still think we see higher prices, but I don’t think we just go straight up. I am long and will be looking to exit the position on a push up and look for another level to re-enter.
Daily Recap
The ES traded down to ~3945 on Globex and opened Thursday’s regular session at 3955.25. After the open, the ES sold off down to 3941.50 and then rallied about 30 points to 3971.75 at 10:01. That was our trade setup from yesterday morning — (buying support near 3945).
After the high, the ES sold off 35 points down to a new low at 3936.75 at 10:14, rallied up to 3954, then tanked down to 3930.25 at 10:27 after a headline hit the tap that President Biden was diagnosed with Covid-19. The ES ‘back and filled’ for the next 10 minutes, then a wave of buy programs hit.
The ES jumped 33 points up to 3962.50 at 11:00 and from there, here 9 to 10-point pullback was bought until the ES hit 3991 at 12:30. From there, the ES needed to consolidate and pulled back 20 points until it found support at 3972. It enjoyed another rally, climbing up to 3995.50 as the 3:50 cash imbalance showed $1.7 billion to buy, then shot up to 4003 before printing 4002.75 at 4:00. After 4:00, the ES traded up to 4004.75, sold off down to 3986.25, and settled at 3991.25 on the 5:00 futures close, up 38.75 points or 0.98% on the day.
In the end, the ES sold off and then the ES rallied. Oil closed down and gold reversed and finished higher. The grains, bonds, dollar…everything is moving. In terms of the ES’s overall tone, it was firm. In terms of the day’s overall trade, volume was decent at 1.85 million contracts traded.
- Daily Range: 74.5 points
- H: 4004.75
- L: 3930.25
Technical Edge
- NYSE Breadth: 59% Upside Volume
- NASDAQ Breadth: 63% Upside Volume (!)
- VIX: ~$23
Game Plan: S&P 500, SPY, Nasdaq, Gold, TSLA
We fished out a really nice trade on the ES yesterday morning, while the bulls are firmly in control of the short-term momentum.
Snap’s 30% plunge this morning is a reminder that we’re still in a bear market and investors must be cautious when taking positions. Stocks are “guilty until proven innocent,” as one trader said yesterday.
S&P 500 — ES
Yesterday we were looking for a test of the 3987 level, followed by 4000. We’re there now. Up 10% from the June low, the S&P is now stretching beyond the usual bear market rally, both in size and duration.
That does have me a little cautious, but I have a hard time being bearish as long as the ES is above 3920 — and thus, above the 50-day, 10-week, and 10-day moving averages.
That puts it above short- and intermediate-term trends, and while I do believe it needs to rest, the 4085 to 4100 level is in play. That’s provided that the ES can stay above 3920 and can eventually get above and stay above 4000.
A Trade on the S&P 500 Futures
This may be a little repetitive, but I’m going to watch a similar setup in the ES as yesterday.
Notice how many times the ES tested 3980 overnight and it held each time. Just below that level — near 3975 — is the 10-ema. This is all on a 4H chart.
If the ES trades down to this area and holds 3975 to 3980, I am going to be long and looking for a push back up toward 4000.
S&P 500 — SPY
The SPY did exactly what we asked by going daily-up over Wednesday’s high. Now the upside is pretty clear: $400 to the gap-fill at $401.44. That’s the next short-term objective.
On the downside, it’s kind of far off at the moment, but the SPY needs to hold $390 to $391.
Nasdaq — NQ
Keeping it simple on the NQ: 12,800 then 13K if the upside momentum continues.
12,150 to 12,250 needs to hold as support on the downside.
GOOGL
Google is trading right near yesterday’s low of $111.11 due to that poor earnings number out of Snap.
If this stock opens below or trades below yesterday’s low early in the session, I will consider a day-trade cash-flow long if it reclaims $111.11 and see if we can’t get a recovery in this name.
This is a lotto-type trade or a cash-flow trade (ie, risking very little to put the trade on, if it triggers).
MSFT
Looking at another big tech name, Microsoft is sitting with a 2x daily-up rotation at $264.89. If we get it, I will consider a lotto trade in this name.
Again, minuscule size because it’s a lotto and these rotation trades can be tough in bear markets.
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: Down to 2 individual holdings against B/E or profitable stops. Good position to be in.
- 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 (and has since been hit).
- Moving stop-loss up to $315 and given the consolidation, I am thinking of holding my last ⅓ for a push to $348 to $350.
- DLTR — Down to ⅓ position and looking for $175 to $177 as our final target. Raising stops to the $165 to $166 area.
Relative strength leaders (List is cleaned up and shorter!) →
- DLTR
- COST
- PEP
- ABBV
- UNH
- XLE
- VRTX
- DG
- 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.
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