Over $3.7 trillion in options expire today.

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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

The PitBull hit it on the head after the big pop-up to 4180 on the CPI release and then the reversal: “How do we know that wasn’t the high print for the rest of the year?” 

I gotta admit it, there were several clues to today’s sell-off and I didn’t pay attention to them. I am also upset with myself that I tried to buy the ES on the way down, I fought the trend day down and lost.

Today we have quad-witch or triple-witch…“Witchever” you prefer, it doesn’t matter; Friday still has the potential to be very choppy. 

Let’s see how Friday shapes up as it could set the tone for the rest of the year. Keep in mind, there are just 10 trading days left in 2022.

Our Lean — Danny’s Take

According to Dow Jones Market Data, yesterday the Nasdaq finished its 84th move this year of at least 2% in either direction. That is the most of any calendar year since 2002. In 2008, there were 83 days when the Nasdaq rose or fell at least 2%. I have been saying there has never been a timeframe like this and guess what? This isn’t going to stop in 2023. 

Our Lean: I expect big two-way flow. It should be busy for the first hour and a half and the last hour. There will be huge volume prints on the open and on the close. 

There may be some bounces today, but higher rates, inflation concerns, a looming recession, and $3.7 trillion in options expiring today and tomorrow have all been weighing on the markets this week. 

The selloff this week seems to be pushing the public to dump losing stock positions at a higher rate and lock in year-end losses. Support in the ES comes in at the 3900 level down to the 3870 level, The bottom of that zone is holding for now, but if the ES starts breaking through that zone, 3823 to 3830 is the next spot. 

Key levels on the upside: 3915 to 3920, 3956 to 3960, 3976, and 4000 to 4005. 

Key levels on the downside: 3921 to 3908 (currently below now), 3977, 3955, and 3823. 

*From the Globex low to yesterday’s high, the 50% retrace is at 3957. The “halfback” of yesterday’s range is ~3975. 

 MiM and Daily Recap

The ES traded down to 3969 on Globex and opened Friday’s regular session at 3976. It rallied up to 3985.25 at 9:31 and then dropped 52 points down to 3933.50. I’ll save you some time: It was a slow bleed lower right from the open. From the 10 a.m. low, the ES rallied 17 points and sold off to new lows. Then rallied another 17.25 points from the low just before noon, before again breaking to new lows. 

The ES bottomed at 3908 at 1:06, traded sideways for 90 minutes, then popped 25 handles to 3938 at 3:00. The ES traded 3921.50 as the 3:50 cash imbalance showed $105 billion to buy and traded 3927 on the 4:00 cash close and settled at 3922 on the 5:00 futures close, down   103 points or 2.57% on the day.

In the end, yesterday’s late rally gave the buyers some hope, but it was negated by the ECB and BoE raising interest rates and adding extreme weakness in the tech sector. In terms of the ES’s overall tone, the DAX led this sell-off, it’s fallen 715 points in the last 3 sessions. In the ES, it was all sell programs and sell stops. In terms of the ES’s overall trade, volume was high at 2.16 million contracts traded. 

I am sure the CME Group would deny it, but shortening the index futures rollover from the Thursday before the expiration to the Monday of expiration week only added to an already volatile environment. As I said, on the floor, the rollover took three weeks but after electronic trading, it was down to seven sessions, and now it’s four.  

Technical Edge

  • NYSE Breadth: 16% Upside Volume (!)
  • Advance/Decline: 19% Advance 
  • VIX: ~$22.80

Mixed bag session on Thursday and obviously not a “win” for the bulls. The market opened daily-down and failed to gain any meaningful traction until late in the day. Downside breadth got above 80% early and stayed there the rest of the day. 

The late-date pop couldn’t get the S&P back above last week’s low and we’re now in a weekly-down state for the SPX and SPY. However, the /ES didn’t break last week’s low on Thursday (thus the “mixed bag” comment), although it did during Globex. 

I’m quite, quite glad we played offense when the market was cooperative, but we’ve been a bit more defensive on the individual stock front (taking profits, raising stops, etc.) It’s imperative to listen to the market’s tells. When it’s healthy, there are plenty of opportunities. When things start to sour, those opportunities dry up quickly. 

S&P 500 — ES

Notice yesterday that the ES bounced off the 3900 to 3920 zone and held last week’s low. Well that’s not the case this morning, with the ES going weekly down. It’s currently bouncing from the 50-day, a great overnight trade for some, I’m sure. 

The question is, will we retest the 50-day and Globex low of 3871 — if indeed that ends up being the low by the time the 9:30 open comes around — in regular-hours trading? 

If so and breadth is okay, we can look for a potential bouncer. Otherwise, a break of this area without a reversal could open the door down to the 3840 level, then eventually 3760 to 3770. 

On the upside, it’s key for the ES to reclaim 3914 to 3920. The overnight high is up at 3934. 


$390 has been a clear pivot and it’s also the 50% retracement of the larger range. How fitting is that, as we swivel around and around this level. 

In any regard, the SPY went weekly down yesterday near $392, which turned to intraday resistance. Then we closed below $390. 

Today, two levels matter: The rising 50-day moving average and the $381.14 gap-fill. If we see the latter, it means the SPY will have fallen 2.2% on the day. The 50% retrace is at $379.30, by the way. 

On the upside, regaining $390 to $392 would be a huge win for the bulls. 


Yesterday we gave a word of warning about AAPL, as it was opening near the $140 to $141 area. Apple has been heavy, and with a market cap in excess of $2.1 trillion, it’s not something to ignore for its impact on the Nasdaq. 

A bit more selling pressure puts the Q4 low in play at $134.37. A break below that level could put the 2022 low in play near $129. 

On the upside, see if Apple can reclaim $140. This is not a trade. This is watching the market’s biggest stock as a clue. 

Open Positions — 

  • Numbered are the trades that are open. 
  • Bold are the trades with recent updates. 
  • Italics show means the trade is closed.
  1. 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.
    1. Stops raised to profitable at $106. 
  2. IBM — last ⅓ stopped at B/E. Nice Trade!
  3. CEG — Exit more at $93+. Looking for $95 to $96 for small trim (down to ½). Down to ⅓ if we see $97.50+
    1. Stops at $89 (essentially B/E)

Go-To Watchlist

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

Relative strength leaders →

  1. LNG — keep an eye $150
  2. CAH 
  3. SBUX
  4. DE — gap-fill & 10-week at ~$413
  • AMGN 
  • HON
  • MET — weekly 
  • GIS
  • CI
  • MCD
  • ENPH, FSLR, CEG — solar has strength 
  • XLE — XOM, CVX, COP, BP, EOG, PXD (Weekly Charts)

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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