The Futures contracts will begin to roll soon to the December expiry.
Please sign up for our free webinar discussing the end of the year happening this Saturday (9/10 at 11:00 EDT). The signup link can be found here. I really hope to see you there!
Our View
The main thing that happened yesterday is that the ES held the 3880 level on Globex and the 3900 level during the day session. After firmly getting above the open and the prior day’s close, the ES ‘dropped & popped’ its way up to 3988.50.
Today is the official start of the rollover — where the December contracts go in the front month configuration. When this happens a large percentage of the volume comes from the spreads.
I have a question for you:
Will the PitBull’s Thursday and Friday low before the September quad witching (next Friday) hold true, and will the S&P continue to rise into the expiration? Will it continue to rally into the quarter-end?
Or is there a ‘great smash job’ coming? I really would like to know what you think!
Our Lean
We all know how the rallies can end in a flash, but I still think there is some upside here.
No, I’m not bullish. But what I’m concerned about is the record number of short ES and SPY positions.
I will say one thing, the ES acted way better than the NASDAQ yesterday, so I will be keeping an eye on that. It’s 8:04 pm (Wed) and the ES is on a downtick at 3976. If the ES gaps 20 higher or 20 lower from yesterday’s close (around 3980), I want to fade it on the open. Other than that, I think you can buy the pullbacks (and don’t be afraid to sell the early 20 and 30-point rips either).
Remember, since the downtrend started after the ES topped out on Aug. 16, they have been selling the 100+ point rallies. It rallied 106 points in late August and that was sold, and from Thursday’s low to the jobs report high on Friday, the ES rallied ~116 points.
No trend stays intact forever and certainly not one like this, but it’s just something to keep in mind.
Daily Recap
The ES traded down to 3883.25 on Globex and opened Wednesday’s regular session at 3906.25. After the open, the ES rallied 32.75 points up to 3924.25, and then made 4 separate new highs up to 3930 and then dropped down to 3917.75 at 9:53, popped up to 3927.25 and then dropped back down to the VWAP at 3911.75 at 10:00…That’s right, all that rip’n & dip’n in 30 minutes.
After the low, the ES traded back up to another lower high at 3926 and then traded below the VWAP down to 3910.25. It was that print that set up a near-80 point rally all the way up to 3988 highs.
I could do all the rips and dips, but despite what the OP said I saw something different going on and I posted it all live in the MTS chat. Below is part of the post but first I must admit I got long 3 times and didn’t catch the up move. It’s a tough way to go, but I have tried to tighten up my risk and that is the result of it.
- Daily Range: 105.25 Points
- High: 3988.75
- Low: 3883.50
Technical Edge
- NYSE Breadth: 82% Upside Volume (!)
- NASDAQ Breadth: 81% Upside Volume (!)
- VIX: ~$25
Game Plan: Bonds, Dollar S&P, Nasdaq
Bonds
Bonds rallied nicely yesterday and are gaining again today. That could give some reprieve to tech, but let’s not forget that the TLT made new 52-week lows earlier this week!
There’s some bullish divergence on the weekly chart when you look up at the RSI measure and a nice “look below” of the prior low at $108.12 before bouncing. Bulls can be long against the new low if they feel so inclined, but I am more using bonds as a guide on equities at the moment.
About a month ago we asked, “What Are the Bonds Trying to Tell Us?”
The bonds were a warning for tech. Now the question is, will we see new lows in stocks?
Dollar — UUP
You could have done just one thing this summer and that’s been long the dollar. Not only would you have made a boatload of cash, but there’d be almost no stress in the trade.
In any regard, anyone still carrying a partial position in our UUP trade, congrats. However, yesterday’s reversal was not encouraging. I want to see how ~$29.20 holds up as support, as that was a big resistance/breakout area, and it’s where the 10-day moving average is.
If it fails, we may need to go back down to the 50-day.
Either way, raising stops to ~$29 is not a bad idea.
S&P 500 — ES
Congrats bulls, I know there are a few of you out there after some members reached out yesterday. We’re not raging bulls by any means, but yesterday’s play proved prudent: “A move over 3925 could put 3960 in play, while 3990 to 4000 looks like a potential brick wall for now.”
We could see more “relief” up to the 4050 to 4090 area, but the ES needs to reclaim and hold 4000 first.
From 3990 to 4030, there are a lot of hurdles in the way, including the vWAP from the 52-week low, the declining 10-day moving average (active resistance for now), and the 50-day.
They are selling the big 100 to 120-point bounces. +120 sends us to about 4005 and the 10-day. At the very least, that has me booking some profit from yesterday and raising stops, and also has me thinking of a possible ‘sell the rally spot’ depending on the response.
SPY
As always, I’m going to keep the SPY pretty simple: $400 to $401 is a sell area in my book.
Active resistance via the 10-day, alongside the 50-day moving average and a psychologically relevant area has my first instinct looking to sell.
If we clear this area, fine. The R/R is still reasonable and we’ll know right away if we’re wrong. I like knowing right away and taking a small cut rather than having someone twist my arm and eating a 50-100 handle loss on the S&P until screaming “uncle!”
In any case, a move over the $401 area opens the door to $406 to $408.
Nasdaq — NQ
Yesterday’s long trade has worked out nicely. Above 12,100 put 12,200 to 12,250 in play, which we hit yesterday. If the NQ can continue pushing, 12,375 could be in play (roughly the 10-day ema).
That said, the 10-day is active resistance. If we get there, be leery of potential sellers.
Nasdaq — QQQ
From yesterday: “On the upside, over $296.50 puts $300 in play.”
Does $299.99 count? Because that was yesterday’s high!
As for today, daily-up over $299.99 that doesn’t reverse could open the door to the $302.50 to $303.75 area. That’s Friday’s high zone and the declining 10-ema. It’s also where we find the 21-week moving average.
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.
For those that want to preserve their gains, feel free to exit any position below, as many are a ½ positions or less. However, these continue to hold up pretty well.
CELH — still watching $90 to $91
TMUS — many still waiting for tag of the 50-day and that’s fine.
LNG — I want to see ~$150
- UUP — Down to ¼ position as we hold for potentially higher prices. Raise stops to $28.40 to $28.50. Look for $30 on the last piece.
- TMUS — for those that took the more aggressive setup. $145 to $146 is a reasonable ¼ to ⅓ trim spot. But $147 to $148 is more ideal.
- CHRW — “A break of yesterday’s low and reclaim would be a decent setup.” That’s exactly what we got. With that setup actually panning out, I like the stop-loss at $111 to $111.40, just below yesterday’s low.
- Trim on any push over yesterday’s high. $116+ is next area of interest
- 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.
- Still looking for $25.50 on the upside.
- Feel free to raise stops to $24.50 (just below last week’s low) and those who added can even trim a little at $25 if they feel so inclined.
- OXY — Got out add spot at $66 and now a little lower, unfortunately. I want to see this back above $66 ASAP, while a stop in the $63s is reasonable.
Relative strength leaders →
Man, Solar came to life yesterday didn’t it? Not surprising as these names litter our top 5.
Top:
- CAH
- TAN
- ENPH
- FSLR
- LNG — Looking for a retest of the $150 area!
- CNC
- F
- XLU
- XLE
- OXY
- BMRN
- PWR
- CHNG
- CELH
- COST
- UNH
Economic Calendar
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