Our View
I know I talk about this a lot, but it feels like the markets are spinning out of control. I know when they go up people are ok with it, but it really isn’t OK. Late yesterday, the ES ‘tanked’ and after 4:00, it reversed higher. Based on the close and it being the end of the month, I think the markets could move higher today.
Whether we rally for a couple of hours or a couple of days though, the current trend remains down. When that changes, so will our tune.
Our Lean
I expect more of the same today — big rips and dips — so I am going to keep the Lean simple. On the upside, I am looking at 4250-4255. If we can clear that, then maybe a short-covering rally can gain steam up toward 4300.
If the ES can’t hold 4235, then perhaps it will revisit 4200.
Daily Recap
It’s hard breaking old habits, but I am in the process of reducing the size of the Opening Print’s recap.
I know I said I would shorten the recap, but I could not get away from writing about all the crazy moves. Clearly, in the world of man vs. machine, man is losing.
The ES opened Wednesday’s regular session around 4179. Ultimately, it down-ticked 2 points and rallied 48 points to a high of 4227 at 9:50, shooting higher by 33 handles in the opening 15 minutes. It broke back below our 4220 resistance level, plunging 70 points in the next 45 minutes, bottoming at 4157 just after 10:30.
After the low, the ES outdid its 70-point drop by rallying almost 80 points, climbing to a high of 4236 at 12:30. From there, the ES dipped 33 points to 4203 at 1:15, bounced 25 handles to 4228 at 1:45, then rolled again.
It found some buyers at 4200 at 2:30, but the bounce set up a lower high at 4223, good for more than 20 points, but that rally failed as the ES fell 44 points into the 3:50 cash imbalance reading. The MIM showed $3 billion to sell, traded down to 4172, then bounced 15 points into the 4:00 cash close, where it finished at 4175.25. After 4:00, the ES rallied hard, climbing 32 points after Facebook reported earnings and settled at 4211.50.
In the end, the only way to describe the day’s trade is a war. In terms of the ES’s overall tone, every dip was bought until the late day sell program. In terms of the ES’s overall trade, volume was high at 1.98 million contracts traded.
- Total Range: 86.75 points
- H: 4236.25
- L: 4149.50
Technical Edge
- NYSE Breadth: 51% Upside Volume
- NASDAQ Breadth: 58% Downside Volume
Wednesday was one of the choppiest days I’ve seen in a while. The ES rallied into our 4220 to 4240 resistance zone, then plunged 70 points. From there, things got choppy and looked something like:
From the open, Up 48. Down 70. Up 80. Down 33. Up 25. Down 56.
When one ES contract is worth $50 a point, these moves add up in a hurry. That’s what life is like when the VIX is $30+
Personally, I found yesterday draining. I caught the initial downside move, but I let the chop get to me. Usually, I can get a pretty good pulse on the market, but it was all over the place yesterday!
Game Plan
Facebook’s post-earnings rip is giving the futures a nice boost today. We’ll see if it can last and have outlined the key levels below.
The fireworks will keep on coming tonight too, with AAPL and AMZN due up after the bell. We’ve had some big downside breadth days, while the VIX is elevated. Sentiment is in the toilet too. That definitely has me on my toes for some type of washout and rally.
S&P 500
Yesterday paid us well on the fade once 4220 was lost. Even catching 25 to 40 points out of that 70-handle dip is enough for most traders to walk away happy. However, the subsequent late-day fade and post-4 p.m. pop leave traders in a tough spot this morning.
The ranges are wide but the levels are clear.
On the upside, watch last week’s low at 4247.50 and the Globex high at ~4259. If the ES can get above and stay above these levels, then the declining 10-day moving average and this week’s high are in play just above 4300.
Above that and 4323 is in play. That could eventually open the door up to the 4365 to 4375 area, which in this week’s video, we said may be a selling opportunity.
On the downside, the Globex low comes into play at a key area: 4200. This has been a line in the sand lately. A break of that and failure to regain it could put 4180 in play, then 4150.
SPY
Gapping up to yesterday’s high in the pre-market now, be aware of a potential fade.
If we clear the high at $422.92, then dip below it, it could give us a low-risk short opportunity, with our stop at today’s high-of-day. If it’s a reasonable risk amount, it may be worth a shot to see if we get some post-EPS fade action.
Otherwise, clearing $423 and holding above it could put last week’s low back in play near $425.50. That’s followed by this week’s high at $428.69 and the declining 10-day moving average.
On the downside, see how the SPY handles $418 to $419. A sustained break below it could put $416 and lower on deck.
QQQ
Like SPY, the QQQ is trading near y’day high in the pre-market at $322.88. A sustained break above this area puts last week’s low in play near $325.
Perhaps with earnings after the close, the $330 to $331 area could be in play, which is this week’s high, the declining 10-day and the 50% retracement of the current range. Definitely a potential resistance zone if we get there.
A break above $322.88 and failure to hold it could give us a decent short trade during the day session. On the downside, see how $318 to $319 holds as support.
Bonds
The TLT gave us a short-trigger yesterday, going daily-down below Tuesday’s low and $122. I trimmed a little yesterday just to put some money in my pocket, but let’s see if we can get a push down into the $119.50 to $120 area to trim more.
Below $119.50 and the low is on the table at $118.67, potentially followed by $116.
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.
A huge number of our B/E stops were hit last week, leaving us with virtually no trades left on the books. Some runners may be in play with WMT and TGT.
- TLT — short from $121.75 to $122 → Trim some on any gap-down today so we can get to a B/E stop-loss. Looking for $119.50 to $120 as next trim zone.
- WMT — Trim at $158 → B/E Stop.
Relative strength leaders (List is cleaned up and shorter!) →
- AR
- ABBV
- PEP
- KO
- MCK
- BMY
- JNJ
- AMGN
- DLTR
- DOW
- VRTX
- XLP — Consumer Staples
- PG
- COST
- MAR
- PANW
Economic Calendar
As we all know, there’s no crystal ball when it comes to trading stocks, options, or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk-free for 30 days.
Comments are closed