The S&P is teetering on breakout territory.
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Our View
There’s no need for a long-winded brief this morning. There was a lot of pent-up buying and selling going on before the Fed and I do not think it’s over. The S&P 500 is teetering on a breakout, longs are starting to mock the short, the VIX hit a one-year low and the market is calling “BS” to the Fed’s rate plans of “higher for longer.”
That said, in a few hours the focus will shift away from Meta’s ~20% post-earnings bump and the Fed’s commentary and back toward earnings. That’s as Apple, Alphabet, and Amazon — a combined $4.6 trillion in market cap — report after the close.
(Then there’s the jobs report on Friday).
Our Lean
Sure we get it right sometimes, but I have known for a long time that as soon as you think you know what the S&P is going to do next, you get burned. We went into yesterday’s event long and after the 2 pm announcement, it was bumpy — as one could expect. However, we resolved higher and got to my 4150 to 4175 target zone, hitting a high of 4163.
As for Friday’s 4175 calls, they went from ~$6.50 on the open to almost $20 at the high. Right before the 2pm announcement, they were on sale for almost $3. Just something to keep in mind when taking a limited-risk approach.
Our Lean: While I think the ES is going to move higher, it’s also important to look at the overall price action — it rallies, pulls back, and then falls into some type of back-and-fill pattern. It has been rising, but not in a dominant fashion.
There are a lot of important economic and earnings reports over the next few days and good or bad, a pullback would help to set up the next leg up. I don’t know if the pull back will last a few days or a few hours but the 4100 to 4120 level should be key and under there is the 4075-4080 level.
Can the markets blast higher today or tomorrow? Sure and I expect it to…it’s just a matter of when. My lean is to sell the early rallies and buy the pullbacks.
MiM and Daily Recap
The ES traded down to 4071 on Globex and opened Wednesday’s regular session at 4077.25. I am not going to do the normal ups and downs in the first part of the recap. After the open the ES rallied up to 4086 at 10:01, sold off down to 4064.75 at 11:01, and traded back up to 4063 at 12:21. It back-and-filled for the next hour and 20 minutes and then ripped up to 4080 at 1:59, just before the Fed raised .25 bps and dropped down to 4052.75 at 2:00:37 and popped back up to 4077.75.
From there, the ES pulled back down to 4058 at 2:03 and rallied up to 4086.75 at 2:10, and then dropped down to 4048.50 at 2:34. It was that low that set up an 80-point rally up to 4129 at 2:53. After the high, the ES pulled back down to 4112.50 at 2:59 and then the ES rallied up to 4144.25 at 3:09.
The ES traded 4138.50 as the 3:50 cash imbalance showed sell $821 million to sell and the futures sold off down to 4126 at 3:54 and traded 4134 on the 4:00 cash close, After 4:00, the ES rallied up to 4147 and settled at 4142.50 on the 5:00 futures close, up 42 points or 1.03% on the day.
In the end, we got what we were looking for. In terms of the ES’s overall tone, it was chop city until the ES 4048.50 low after the Fed and then pretty much straight up after. In terms of the ES’s overall trade, volume was high at 1.94 million contracts traded.
Technical Edge
- NYSE Breadth: 68% Upside Volume
- Advance/Decline: 72% Advance
- VIX: ~$17.70
As noted yesterday, it was not what the Fed did in regards to its rate hike — up 25 bps — it was what it said during the press conference that got us moving yesterday.
Let’s keep it short (and be sure to check out the adjustments on the individual stock trades section if you’re long them).
S&P 500 — ES
The SPY and SPX have technically pushed through their breakout point. Because the ES incorporates Globex though, it’s not quite there. 4175-80 is the big level to watch.
If the ES can clear yesterday’s high and this zone, it could put another 125 to 150 points in play up to the 4300 to 4325 zone.
If they sell the open, watch 4137. If we dance around and hold this level, it could be a good long. Otherwise, it could open the door back down to 4100-4110 (last week’s high).
SPY
We went weekly-up over ~$408, climbed all the way to $413.67, then pulled back and barely closed over the $410 breakout level.
I’d love to see the SPY/SPX end the week above the $410/4100 area and help cement the current breakout. For now, though, it’s doing so and it’s hard not to be leaning bullish until proven otherwise (like a close back below $410).
Zoomed In
Currently set to open just above yesterday’s high, I find it hard not to be a seller if we open at ~414 and trade back below $413.67.
I wouldn’t be looking for anything crazy, just a cash flow to put a few bucks in our pocket and look for prices to reset and stabilize a bit.
This is an active trade where our risk would be limited to a stop near the HOD, assuming it’s reasonably near our short trigger (which is $413.67).
META
I don’t have a horse in this META race, but just keep an eye on the $180 to $185 range, as highlighted a bit.
This was a big pivot zone and shares are gapping up about 20% into this area. Coming into earnings, Meta was up almost 70% from the low, so it’s enjoyed a big move already and this could be a profit-taking zone.
Open Positions
- Numbered are the trades that are open.
- Bold are the trades with recent updates.
- Italics show means the trade is closed.
(Any positions that get down to ¼ or less (AKA runners) are removed from the list below and left up to you to manage. My only suggestion would be B/E or better stops.)
From this latest round, that includes TLT, DE and FSLR.
- COP — Long from $119, the 2x weekly-up. Trimmed ¼ at the 50-day. Still watching $123.50+ for the next trim. Can technically raise stops to $118-119 or B/E, (whichever suits your style better).
- If still long, $127 to $127.50 is the next trim spot
- NKE — Down to ⅓ or ½ after yesterday’s $128+ Trim. If carrying ½, perhaps look to get down to ⅓ or ¼ if we see 130+ today. That said, NKE has held up well and I like the idea of holding some runners here. B/E stop
- NFLX — Gave us 3 targets yesterday: A move over Tuesday’s HOD, $360 and $365.
- Make sure you’ve got a B/E stop (or better) and fish for $369 to $370+ on the final tranche.
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
Relative strength leaders →
- AQUA
- AEHR
- MELI
- GE
- WYNN, LVS
- NVDA, NFLX, TSLA, SHOP
- SBUX
- AXP
- BA & Airlines — AAL, DAL, UAL
- TJX, ULTA, NKE
- CAT
- HCCI
- XLE — XOM, CVX, COP, BP, EOG, PXD — (Weekly Charts)
Economic Calendar
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