Video Of The Day
This morning’s video gives a 10-12 minute rundown of the current “mixed bag” market.
Our View
The Nasdaq was under pressure all day on Friday as bonds continued lower. While the ES fought the NQ all day and tried to rally, the Nasdaq won and the MIM of $2.4 billion to sell was definitely the reason none of the rallies could hold.
Sometimes the price action in the ES is a slow grind with nothing going on and out of nowhere the futures drop or rally 30 points in 20 minutes. The market-making firms make billions and destroy the smaller accounts in the process. I’m still quick to point out the patterns, but they tend to disappear quicker than they ever have in the past.
We all know there are dark clouds hanging over the stock market, but it doesn’t pay to get overly bullish or bearish.
Our Lean — Retail Sales, PPI & CPI
We’re entering a holiday-shortened four-day trading week, but that doesn’t mean there are a lack of key events to watch. We have the CPI data (consumer inflation data) on Tuesday, the PPI on Wednesday and retail sales on Thursday. Not to mention, bank earnings start on Wednesday too.
It’s hard to imagine that the CPI or PPI reports will impress while rising rates from the Fed means higher cost for borrowers on top of already surging gas and food costs. Maybe the ES can dodge some of the bad news, but not all of it.
According to the Stock Trader’s Almanac, the Monday before the April expiration has been down 10 of the last 17 occasions. Further, the April expiration has the Dow up 17 of the last 25 occasions, but down 5 of the last 8. However, the Nasdaq has been up 20 of the last 21 sessions in the day before Good Friday.
Our lean starts with Friday’s weak close and Globex on Sunday night. In most cases when the ES closes weak, it rallies on Globex. Should the ES gap lower on the 9:30 futures open, I would be looking to buy the early weakness with a close eye on the bonds — which as of 8:15 ET are lower…again.
While I do not like the price action overall, I think it’s important not to overlook April’s overall positive stats (Dow averages a 2% gain on the month).
Lastly, keep an eye on oil. To me it looks to have topped and could be heading back to the low-$80s (where it finds the 200-day and 161.8% downside extension).
Daily Recap
The ES opened Friday’s regular sessions at 4489.25, dropped down to 4468.75 at 10:00 and then bounced to 4485 at 10:10. After the pop, the ES sold off down to 4470.50, climbed back to its opening price of 4489.25 at 10:33 and after some consolidation, shot up to 4512 just after 11:00. After some chopping around, the ES rallied to a new high of 4516, but couldn’t take out its Globex highs near 4520.
From there, the markets faded a bit, dipping to 4486 at 2:37. After another Riley retest (higher low), the ES rallied up to 4501 at 2:55. The ES fought to rally all day, but just couldn’t find its footing as bonds weighed down tech.
The ES traded 4486.50 as the 3:50 cash imbalance showed $2.4 billion to sell, sold off down to 4479.25, and traded 4487 on the 4:00 cash close. It settled at 4483.50 on the 5:00 futures close, down 12.75 points or -0.28% on the day.
In the end, the weak bond market weighed on the Nasdaq all day and held the ES hostage. In terms of the ES’s overall tone, it was weak but not as weak as the NQ and RTY. In terms of the ES’s overall trade, volume was slightly higher at 1.358 million contracts, but slightly below the 20-day average of 1.449 million.
- Total Range: 51 points
- H: 4519.75
- L: 4468.75
Technical Edge
- NYSE Breadth: 57.5% Upside Volume
- NASDAQ Breadth: 37.9% Upside Volume
Please see today’s video for a reference on how the markets are shaping up and please look through the Go-To watchlist and numbered setups.
S&P 500 — ES
Coming into Monday’s session, it’s pretty simple: We’re watching 4500 on the upside and 4444 on the downside.
If the ES can push above 4500, that’s followed by 4515 to 4520. Above that opens the door to 4533-ish.
On the downside, bulls really want to see 4444 hold as support. Below that level opens the door down to the 50-day near 4420, then the key 4400 level. That’s followed by 4366.
TLT
Bonds have been a big driver for stocks, particularly tech. Could we see an eventual move down to the 200-month moving average?
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
Numbered are the ones I’m watching most closely. Please look at these closely, as there are several updates (the most recent of which are noted in bold).
- PANW — Larger time frame upside target still $645 to $655. Relative strength leader and inside week last week. I would prefer an inside-and-up rotation, but not looking likely. Watch last week’s low of ~$596.50 and the 21-day. If these measures hold, PANW could be a bounce candidate
- MKC — $103 to $104 Trim Spot hit → Stop now at break-even or ~$99. Look for another small trim at $105+ | If we see $107 I want to be down to just ⅓ position
- DLTR — First two price targets hit. Now down to ½ and trimming the rest at $165 with a break-even stop-loss
- TGT — Monthly-up trigger from Friday hit, as well as our first price target of $236 — Now let’s see if it can settle in. As long as it holds $229.25, let’s see if we can clear $236. Above puts $250 in play.
- HD — Nice pop so far, but a bumpy start to the week on tap. Conservative bulls can use a B/E stop now. I am still looking for $320 to $325 on the upside.
- MCK — All price targets hit. Flat or just runners now.
Look at how strong these stocks have been!! In a market rife with volatility, head-fakes and downtrends, these names are trending higher. That’s why I always say “feel free to build your own trades off these relative strength leaders!” They are dominant.
- COST
- BRK.B
- XLB — ADM, MOS, NTR, CTVA, NEM
- ABBV
- TU
- VRTX
- BMY
- Energy — FLNG, XLE, APA, CNQ, CVX, ENB, PXD — etc.
- PANW
- AR
- AMGN
- ABC
- UNH
- VRTX
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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