The S&P sits between two key zones as we wait.
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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 only thing I can say is “what a mess.” The ES gave us a nice trade yesterday shortly after the open, then the headlines went wild.
Economic reports, earnings, the Fed, and now the story of two Russian missiles crossing into Poland — which is in NATO. After the headlines, crude oil and grains rallied.
I keep telling the PitBull that this is going to be like this for a very long time. I have said many times that as the winter weather hits Europe, Putin will escalate his attacks on Ukraine and it appears to be starting. Putin is in a desperate situation. His army is depleted and several of his most staunch backers, including the Chinese, are calling for negotiations and an end to the war.
I said several times this year that “things felt disjointed” and the next phase of Putin’s ‘special military operation’ is getting even uglier. The story about the Russian missiles landing in Poland is not over, especially if Nato enforces its Article 5, which specifies that any attack on any member country is effectively an attack against them all.
Our Lean — Danny’s Take
As I have said many times recently, I am a cautious bull. However, with the Fed still talking about its hawkish stance and with Putin’s war in Ukraine heading into a new phase, I believe the end of the year may be more about protecting portfolios than adding to them.
It’s Wednesday now, and from the low a week ago to the high yesterday, we’ve seen the S&P climb 300 points or 8%. The Nasdaq has rallied even more.
Can the ES trade back up to 4050 or 4100? Sure, but I think there could be repeats of what we saw yesterday.
The buyers continue to buy the pullbacks at the 3960 to 3980 area and I don’t disagree with it until it fails, but I think you can sell the 40 to 60-point rallies for now.
Watch 4015 to 4020. So far that’s been resistance. On the downside, 3960 has to hold for bulls to remain in active control. Otherwise, they’ll be put to a real test in the 3900 to 3920 area.
MiM and Daily Recap
| Up | Down | Net Flow | |
| Last 20 Sessions | 16 | 4 | $18.7 Billion |
| Last 10 | 9 | 1 | $11.5 Billion |
| Last 5 | 4 | 1 | $6.8 Billion |
| Yesterday | Buy | $1.25 billion |
The table above shows where the MOC money has been flowing over the past five days (week), the past 10 days (two weeks) and the past 20 days (past month).
The ES traded 3996 as the 3:50 cash imbalance showed $1.25 billion to buy, traded 4000.50 on the 4:00 cash close, and settled at 3994.75 on the 5:00 futures close, up 33.50 points or 0.84% on the day.
In the end, it was “headline hell.” A big early rip after the PPI number, a selloff as the Fed headlines showed more hawkishness, and then the ‘flunk-a-dunk’ after it was reported that Russian missiles landed in Poland which Russia’s defense ministry has denied. In terms of the ES’s overall tone, it was “skittish.” In terms of the ES’s overall trade, volume was on the high end at 2.16 million contracts traded.
Technical Edge
- NYSE Breadth: 75% Upside Volume
- Advance/Decline: 76% Advance
- VIX: ~$24.40
Despite the headline-driven volatility yesterday, we still had a 75% upside day and the indices still put in a green session.
That said, the S&P failed to hold 4000 for a third-straight session, while the Nasdaq struggled with a key junction on the charts as well.
For now, the trend remains in favor of the bulls. However, the real key becomes, how will the markets hold up to a larger dip? In my view — and it means nothing at all compared to what the markets want to do — it would be healthy to retrace some of the recent rally from last week. Let’s get into the specifics.
S&P 500 — ES
The first word that comes to mind here is: Patience.
The close from last Thursday was 3961. The low from Friday, Monday and Tuesday were: 3951, 3964 and 3960.
On the upside, 4015-ish has been resistance.
If the ES can clear this range, then 4050 is back in play, along with the 200-day moving average near 4075.
On the downside, 3950 to 3960 is support until proven otherwise. It would take a 2% dip today to get there, but I’d love to see a test of 3920. Not only has that been a key pivot, but it’s also where the 10-day moving average comes into play.
ES — The Trade
Multi-day look at the 30-min chart above. Let’s see if the ES can get above 4000, then ~4015. That’s resistance from the Globex session, as noted above.
Support outlined on the downside.
Patience!
SPY — Daily
It’s a pretty similar story with the SPY as it tangles with the 61.8% retrace.
On the downside, $394.50 to $395 has been support. A break of that area could put $390 in play, along with the 10-day moving average. That gives bulls a better R/R opportunity.
On the upside, it needs to regain and hold $400.
If today, that puts $402.30 back in play — yesterday’s high. Should the upside trade play out, bulls will look for a push up to the 200-day moving average and the gap-fill near $408.50.
TLT
Great action so far and bulls should look to trim around $100, +/-$0.50 of that mark.
CAH
I’m still keeping a close eye on CAH today to see if we can get a dip-buy down to $71 to $72.
US Dollar — DXY
The dollar is under a bit of pressure this morning. Continue to keep an eye on long-term support in the DXY and the UUP.
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
- Numbered are the trades that are open. g
- Bold are the trades with recent updates.
- Italics show means the trade is closed.
Open Positions
- MCD — Trim ¼ to ⅓ at $275-$276, ideally the latter. Can be down to ½ position if we see $278+. Can use $268 stop.
- TLT — I am long some TLT from ~$97.50 as flagged from Friday, but looking to fill out the position at/near $96.
- Aim to trim around $100. plus/minus 50 cents of that level.
- CCRN — B/E or better stop-loss now as CCRN is up almost 10% from our entry and we have trimmed at least ⅓ and likely more about half.
- Next trim zone if ~$34.25 to $35.
- Personally using $31.50 as my stop (up about $1.10 from my basis).
Relative strength leaders →
- LNG
- CAH
- TJX
- CI
- AMGN
- CCRN
- GIS
- LPLA
- REGN
- ENPH, FSLR — solar has strength
- VRTX
- UNH
- MRK
- XLE — XOM, CVX, COP, BP, EOG, PXD
- NOC
Economic Calendar
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