Jamie Dimon and Paul Tudor Jones are not bullish.
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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
One of these days I am going to write something positive, just not today. Yesterday JPMorgan CEO Jamie Dimon gave a gloomy look about the US and global economies.
While the US economy is actually doing quite well at the moment, Dimon “cited the impact of runaway inflation, interest rates going up more than expected, the unknown effects of quantitative tightening, and Russia’s war in Ukraine” as reasons to be cautious.
“These are very, very serious things which I think are likely to push the U.S. and the world — I mean, Europe is already in recession — and they’re likely to put the U.S. in some kind of recession six to nine months from now,” Dimon said.
Legendary investor and trader Paul Tudor Jones did not offer much of a silver lining, either.
Jones said he “believes the U.S. economy is either near or already in the middle of a recession…Most recessions last about 300 days from the commencement of it…[but] I don’t know whether it started now or it started two months ago.”
That likely means that stocks and bonds have more losses on the way, according to PTJ, who has a “playbook” for these types of recessionary periods.
“Short-term rates will stop going up, and start going down before U.S. stocks finally bottom.” Once rates stop going up and start coming down, the bonds of these short-term yields will start to rise. That turning point can drive stocks — and even crypto — higher as a result.
Our Lean — Danny’s Take
Sometimes the simplest things can paint a picture and the last 10 closes clearly are part of something we call CHOP:
On one side, the bulls could say the ES is back-and-filling and on the other, the bears could say the ES is just wasting time until Thursday’s dreaded CPI number. What I say is, the ES is just wasting time until the next leg down.
Our lean is to keep selling the 40 to 60-point rallies, ES 3500 is not far off.
Daily Recap
The ES traded down to 3618 on Globex and opened Monday’s regular session at 3663. After the open, the ES traded 3665.50 and then dropped ~50 points down to 3616 at 11:04. After the low the ES rallied up to 3634.25 at 11:25, sold off down to 3620.50, rallied to 3637.75, and then dropped down to 3600 at 1:11.
It traded 3621.25 at 1:43 and ripped ~25 points up to 3647 as a headline hit saying: Russia Is Open For Diplomacy. At 2:24, the ES dropped down to 3622.25. The ES traded 3637.50 as the 3:50 cash imbalance showed $445 million to sell, then traded down to 3623.50. The ES traded 3625 on the 4:00 cash close and settled at 3627.50 on the 5:00 futures close, down 23.5 points or -0.64% on the day.
In the end, the best trade of the day was selling the gap up open. In terms of the ES’s overall tone, it was wishy-washy. In terms of the ES’s overall trade, volume was higher than I expected at 1.989 million contracts traded.
Technical Edge
- NYSE Breadth: 78% Downside Volume
- Advance/Decline: 68.5% Decline
- VIX: ~$33.25
(There are a few individual stock setups under the Go-To Watchlist section).
Game Plan: S&P, Nasdaq, Bonds
The market does not have to bottom on capitulation, but these moves tend to end in one of two ways: Through time or through price.
Time takes investors’ patience and price takes investors’ money.
However, it’s my view that if we could just get a couple of capitulation-like days to the downside, we could put in an intermediate-term low to trade against and again find opportunity on the long side. The way things are going now — in a painful, drawn-out manner — just keeps the downtrend intact.
Bonds rallying and the dollar under a little pressure today may give some relief to stocks. The looming PPI and CPI data likely has investors on edge, though.
S&P 500 — ES
Not deep enough in the hole to buy and certainly not up enough to sell, as the ES is now down in four straight sessions but finding some buyers in that 3570 to 3600 area.
Go tactically from here.
Back above yesterday’s low is a start for the bulls, but they need to reclaim the June low near 3639. Above that and Monday’s high is in play at 3667.50. Above that could get us to ~3700 and the 10-day ema (to set up for a possible short).
On the downside, a move back below yesterday’s low of 3600 puts the Globex low in play at 3584, followed by last week’s low of 3571.
I know that sounds like a lot, but simply go level to level, see if price accepts or rejects the ES in those areas, and keep an eye on bonds and the dollar.
SPY
A little bit in no man’s land here, as there is not a high R/R buy or sale setup on the daily chart. The SPY held last week’s low after a “look below” but it’s still below the June low.
If it can reclaim the June low, Monday’s high is in play at $364.21. Above that could put the declining 10-day ema in play.
Below $359.21 (last week’s low) and we could retest the $357s, which is the 2022 low and Monday’s low.
Nasdaq — NQ
Good: Buyers keep showing up in the 10,850 to 10,890 area.
Bad: The NQ rallied hard off the June low last week, but seems to be getting comfortable below it now.
Like the ES, keep an eye on the June low of 11,068. Above that puts 11,136 in play (Monday’s high) and starts to give bulls a little leeway. Ultimately, 11,250 to 11,300 would be the upside target over the next day or two if bulls can keep gaining momentum.
Otherwise, the 10,850 to 10,890 area remains in play and critical — especially if the NQ remains below 11,100.
QQQ
The last two weeks of lows come into play around the $267.10 to $267.50 area, as the QQQ now starts to build below this zone.
Bulls need to see the QQQ get out of this area, and ideally, rotate over the June low of $269.28 and Monday’s high of $269.70. That could open the door up to the declining 10-day ema and give us a decent long trade into a potential short setup.
Below $267 to $269 just remains bearish.
TLT
Bonds have a bit of a bid this morning — I know, right?!
If we open above $100 and go daily-up over $100.51, it could give the TLT a push up to the declining 10-day, which has been VERY ACTIVE RESISTANCE for months now.
Go-To Watchlist
*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.
Notes:
FSLR — nearly got us the $123 & 50-day test yesterday. If you got long on the near-tag, I would trim near $132 to $133 and get down to ⅓ or ½ if we see $140.
XLE — Set to open lower, let’s see if we see $78 today for a chance on the long side.
Relative strength leaders →
Top:
- LNG — nearing the breakout near $150
- MCK — holding the breakout near $340
- CAH — holding the breakout near $64
Here’s a quick look at the stocks above (in the Opening Print Twitter Community).
- LPLA
- CCRN
- FLSR
- ALB
- VRTX
- CYTK
Economic Calendar
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