Our View
Despite all the thrashing, the ES only had a 34.25 point range yesterday. Additionally, the ES was weaker than the NQ and closed that way. Based on the close I expect a lower price on Globex and am on the lookout for any Russian escalation on Ukraine’s Independence Day.
I have not said much about this, but I also think the US is inching its way to a war with China if it’s not careful. The US has been moving military assets to Asia, while China continues to fire ballistic missiles and had 62 aircraft flying around the Taiwan strait. China is definitely gearing up for a war and I think this would be a major mistake to engage the Chinese in their waters. It’s estimated that the US would lose up to 200 aircraft and its entire fleet of ships and fire hundreds of ballistic missiles at Guam. I have to ask… is this really where we want to go? I don’t think so.
I try to keep the geopolitical stuff to a minimum, but this would be a big deal. The US and China are not only the No. 1 and No. 2 economies in the world, but they are big trade partners as well.
Our Lean
The ES and NQ traded down to new lows on Globex and are modestly higher this morning. While I can’t not rule out a bounce, I think there is a good chance we see lower prices. You can buy the early pullbacks and sell the rallies or just be patient and sell any 30- to 50- point rallies.
Daily Recap
The ES opened Tuesday’s regular session at 4136.25 and shot up 30.50 points to the session high at 4161.75. That just edged out the Globex high around 4157. Easy come, easy go, as the ES then fell ~34 points down to 4127.50.
From there, the ES settled into a 15 to 18-point trading range. Off the 4127.50 low, it rallied 15.50 points to the 4142 to 4144 range, which became stiff resistance for the rest of the session. From there, it fell 18 points just after 12:00 noon, hitting the regular-session low of 4125. It bounced 18.50 points into resistance, fell ~16 points to 4127.50 — again — then rallied 15 points into resistance.
One last ~15-point pullback landed the ES in the 4128 area going into the final 15 minutes of the day and it traded 4133.50 as the 3:50 cash imbalance showed $2.8 billion to sell. The ES dropped down to 4129 and traded 4131.50 on the 4:00 cash close. It traded 4128 on the 5:00 futures close, down 10.75 points or 0.26% on the day.
In the end, it was pretty much like I thought: Rally then pull back. In terms of the ES’s overall tone, it was weak, but the total trading range was only 43.75 points if you count Globex and just 34.25 points in the regular session. In terms of the ES’s overall trade, volume was steady but not large at 1.55 million contracts traded.
- Daily Range: 43.75 points
- H: 4170
- L: 4118
Technical Edge
- NYSE Breadth: 57% Upside Volume
- NASDAQ Breadth: 50% Upside Volume
- VIX: ~$23.75
Game Plan: S&P, Nasdaq, Oil, OXY, PEP, Utilities
Three straight down days later and we’re still waiting for the S&P to reclaim support. The question is, will the low-volume rally unravel here or will the bulls step up?
Obviously, there is some chopping and hesitancy ahead of the Fed’s Jackson Hole event and that may continue going forward.
Yesterday, we gave a midday update on a couple of trades to watch, one of which triggered already.
S&P 500 — ES
“From here, I want to see if we can get a bounce going and how strong it is if we get it. Basically, I want to know if 4170 to 4200 will be resistance or if the bulls can reclaim it.”
Yesterday’s high was 4161.75, but it’s something to note as this prior support level is not being reclaimed.
This is pretty straightforward: I want to see the ES reclaim the 4170 area and the 21-day moving average. If we can go daily-up today over 4161.75, then 4170 is up next.
A move above that level without reversing could give bulls a test of 4200 and the 10-day. As for VWAP traders, check this chart out:
We have three VWAPs drawn in: One from the recent high, one from the low, and one based on volume. Those come into play at 4085, 4020 and 3980, respectively.
The last of those — the VWAP from the 2022 low — also comes into play near the 50-day moving average. I would keep these measures in mind. If we lose 4018 — yesterday’s low — then we could see 4100, then the first of the VWAP measures near 4080.
S&P 500 — SPY
The SPY rallied to the 21-day and the key level near $416 and was rejected. That was after already filling the gap at $412.75.
I want to see a daily-up over the 21-day moving average and a $416 area to feel better about the SPY. Otherwise, I’m waiting to see where support ultimately comes into play.
Keep $411.77 on your radar — yesterday’s low. Losing that level and failing to reclaim it keeps us the market in a “risk off” mood.
Nasdaq — NQ
Based on the VWAPs, the NQ could have support come into play soon. Otherwise, I’m looking at the 10-day and 21-day moving averages as possible resistance and the 50-day and 50% retracement as possible support near 12,350 to 12,400.
Oil
Now pushing into the 200-day and resistance from earlier this month, keep an eye on oil.
Again, I don’t have a position here, but the “inflation is dying” crowd is going to have a problem if energy prices continue to fly higher into the end of Q3/beginning of Q4.
CHNG
We are down to ⅓ position in CHNG after hitting two upside targets. However, we also have a nice reset in this one at the 10-day, with back-to-back daily highs of $24.83.
If we get a 2x daily-up over $24.83, bulls can add to the position and keep trying for $25.50+
$24.25 would probably a reasonable initial stop-loss, especially depending on one’s basis from the first position.
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.
- UUP — Down to ¼ position as we hold for potentially higher prices. Raise stops to $28.40 to $28.50.
- CHNG — second target of $25 hit. Now down to just ⅓ position. Take all profit here or move to a B/E stop and look for $25.50.
- APLS — HALF position at $65. Exit at even for conservative traders. Otherwise, $63.50 stop-loss and $68 as our first upside target.
- AR — Out ⅔ of position after hitting our second target at $44. B/E stop. Might as well look for $46.50+ for the rest.
- O — long from $70.50, as mentioned in yesterday’s midday update. $72.50 is our first upside target. $68.75 is a reasonable initial Stop-loss.
Relative strength leaders (List is cleaned up and shorter!) →
Top 5:
- HRB
- PEP
- XLU
- CI
- MCK
The Rest:
- CNC
- F
- BMRN
- APLS
- ENPH
- TAN
- FSLR
- LNG
- PWR
- CHNG
- CELH
- COST
- UNH
Economic Calendar
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