Our View
The first few days of the New Year have seemed a bit shaky the past few years. Not shaky in the sense that bulls can’t find their footing, but in the sense that it’s a bit like post-Fed days, where we have indecision and jerky up-and-down action.
Take yesterday for example. The futures were up nicely overnight, flopped at the open then found some late-day momentum to the upside.
The Nasdaq went out at the session high despite the 10-year yield (TNX) climbing almost 8% yesterday and closing near its session high. Generally, tech and high-growth stocks struggle against a rising-rate environment. For what it’s worth, ARKK climbed 2.5% yesterday.
I know we generally keep the discussion to the S&P here, but some of these crosscurrents are hard to ignore.
Our Lean
We had a nice bounce from Monday’s low and a solid push higher into the close.
What I want to see now is simple: A push above 4,800. If we can get that, perhaps the ES can get a short squeeze going as the buy stops have been building in this area for over a week now.
If we can hold the 4780 to 4785 area on a pullback, it may be a dip to buy on a move back up to 4800+.
Daily Recap
The ES was trading strong in Sunday’s Globex session and hit a high of 4791.25 just after 6 a.m. on Monday. However, they sold the S&P coming into the open, as the ES traded 4775 at 9:30 a.m. ET.
The S&P futures rallied to a high of 4786.50 in the first 15 minutes — a lower high from the Globex high — and rolled over, dropping all the way down to 4747.50 by 10 a.m. That was a 44 handle dip from the Globex high and a 25.50 point drop from the open.
From there, the ES bounced, rallying to another lower high at 4777.25 just after 10:30 a.m., then retreating to a higher low of 4753.50 about an hour later. From there, the ES rallied to another lower high at 4769 at 12:15, dipped to just 4762 on the downside, then took off higher for the afternoon.
The ES peeled off six straight higher closes on the 30-minute chart, closing at 4786.50 on the 4:00 p.m. cash close and settling at 4784.50 on the 5:00 futures close, up 23 points or 0.48% on the day.
In the End
In the end, the ES was weak off the open and firm in the afternoon. As for the ES’s overall trade, volume was higher at 1.27 million contracts. The most impressive part of the day was the rally in the NQ despite the rise in the 10-year.
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Technical Breakdown
- NYSE Breadth: 70.75% upside volume
- NASDAQ Breadth: 76.4% upside volume
Monday was a bit of an odd day — with a surge in rates and strong upside volume in the NYSE and NASDAQ.
The Nasdaq churned out a 76% upside volume day, which is damn impressive considering the move in rates. So far bonds are under a bit more pressure in the pre-market (thus rates would be up).
Let’s see if we get a fade in rates or a continuation. If it’s the latter, I will keep my eye on the Nasdaq and ARKK as it’s hard to imagine they can rally notably with that type of headwind.
On the flip side, if rates open higher and fade throughout the day, then that could give tech stocks a nice tailwind to work with.
Game Plan
They bought the dip a hair ahead of the level I was looking for in the SPY yesterday, which then went daily-up over Friday’s high.
I want to see that momentum continue and for the SPY to hit new highs. Apple hit new highs on Monday, as well as a $3 trillion valuation. Can we get a bit more “oomph” in the market from here?
S&P 500 — ES Futures
Whether you look at the futures, the SPY, or the SPX index, it’s all similar: The index undercut Friday’s low, gave us a near-test of the 10-day and the prior breakout area, then reversed higher and went daily up.
As you can see, the ES is now contending the 4800 level and gave a quick Globex pop up to 4807.50.
From here, let’s see how the ES handles a rally back up to the 4800 level. Above that, we need to see if it can get above and stay above the Globex high.
Otherwise, the 4780 to 4785 area will be on watch.
QQQ
A bit less strength in the QQQ, but nevertheless it had similar action to the S&P on Monday. Shares undercut the prior day’s low, then reversed higher into a daily-up rotation.
We asked for morning weakness yesterday and got it. That also helped set up some individual trades yesterday.
In a rare observation, the Nasdaq underperformed the S&P 500 in 2021 and continues to lag it now (from the perspective that the S&P 500 has had more relative strength between the two).
From here, I want to see some continuation in the QQQ. That’s where rates come into play, so consider keeping both up on your screen today.
Individual Stocks — CSCO, ZTS, ACN,
Because of the morning pullback, there were a few trades that were able to fire yesterday off our watchlist. CSCO and COST held up best. I flagged a few more after the open on Twitter.
From here, let’s see that the stocks that pulled back give us some type of upside push.
Even a small rally off the open can give us a chance to trim a bit and reduce our carrying risk.
Cisco
This was on the list from yesterday, but I love the dip and love the bounce. If Cisco can go daily-up over $63.35, it puts the highs in play near $64 to $64.25. New highs open the door to the 161.8% extension near $66.
On the downside, I don’t want to see Cisco lose last week’s low at $62.28. That puts it below Monday’s low and the 10-day as well.
Zoetis
Zoetis was on the list yesterday today and while the stock has been a beast, it was hit hard yesterday, falling 4%. The 21-day tried to act as support and couldn’t hold up.
I had a small position in the name off that 21-day tag, but it couldn’t fetch a bid when the rest of the market was bouncing and I was stopped out.
That’s okay. From here, I’m looking for a flat to lower open, preferably the latter. If we get an open below Monday’s low and a reclaim of this mark (at $233.32), we could see a quick push back up through the 21-day.
If we don’t get a bounce, don’t sit in a loser!
Semiconductors
The semi’s traded incredibly well yesterday. After a strong five-day run, the SMH gently pulled back over a four-day stretch to the 10-day, then went daily-up on Monday.
Let’s see if the SMH can give us some continuation, which bodes well for QCOM (next on the list), but also TSM, NVDA, AMD, LRCX, ON, and a whole host of others that have been trading well.
Qualcomm
Not the strongest trender in the world right now, but keep an eye on QCOM if it goes weekly-up over $187.40.
AVGO
Watch AVGO for a reset trade, as it nears the 10-day moving average. A break of Monday’s low and a reclaim could give us a potential entry too.
We want to own this one, but the entry has to be smart.
Oracle
If you have been reading the Game Plan for a while, you know I love a good reversal. Oracle gave us one yesterday — which I missed in real-time! — as it reclaimed Friday’s low.
Monday’s green finish was Oracle’s first daily gain in 12 sessions! And it came off a test of the 200-day moving average. A reclaim off the prior low and a test of a key moving average. Beautiful. Let’s see if it can continue higher. Above the 10-day and a move into the $90s is possible.
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!
Economic Outlook
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