It’s been a long week with a lot of upside. We’ve got the Fed out of the way and now all of FAANG. Today is the jobs report and Options “Fry-day” and I am going to keep this short.
Edit: The jobs “just” dropped and wow, it was a blowout! See the “economic data” section below for its results.
The S&P is now up 9% YTD and the Nasdaq is up a whopping 16.5%. Long before the ES and Nasdaq started going up, the Dow was the market leader. It rallied over 20% from the October low into December. However, it’s up less than 3% so far in 2023.
My point is, the Dow outperformed while the ES and NQ were a lot weaker. Now it’s the opposite. Over the last few weeks, the mutual funds and institutional accounts have been rotating out of the Dow stocks and buying the Dow, S&P, and Russell.
You must always keep an eye on what is leading because these assets tend to “shift gears.”
From Tuesday’s low to yesterday’s high, the ES has rallied over 200 points or 5%, while the NQ has climbed almost 1,100 or up 9.1%.
It’s been an incredible rally, but I think it’s overdue for a small pullback. Maybe today we will see some of it. If the ES and NQ open 10 to 20 higher, my lean is to sell the early rallies and buy the deeper pullback. On the flip side, if the ES gaps down hard I would be looking to buy the early weakness with tight stops.
Note: This doesn’t mean the rally is over, but it is overbought in the short term.
The ES did fade nicely overnight, down almost 40 handles. But now it’s much more mellow — down about 15 to 20 — heading into the jobs report. Remember, it just takes one or two good trades a day to make a huge difference in your mental state and bank statement. Be patient and wait for the fat pitches today.
MiM and Daily Recap
This is going to be one of my shortest recaps. The ES traded down to 4136.75 on Globex (not much of a pullback) and traded up to 4176.25 early Thursday morning and opened the regular session at 4172.50. After the open, the ES pulled back below the VWAP near 4153.25 at 10:12 and it was that low that set up the push above 4200. After the low, the ES rallied up to 4196.75 at 10:54, then pulled back down to 4181.25 at 12:11 and then ripped up to 4208.50 at 2:42, and then dropped down to ~4157 at exactly 3:03.
As we neared the “big levels,” here was my take:
The ES rallied back up to the 4172.50 level, sold off down to 4159.50, and then rallied back up to 4186 at 3:38. The ES traded 4180.50 as 3:50 cash imbalance showed $224 million to buy and traded 4192 on the 4:00 cash close. After 4:00, the ES sold off and settled at 4164.75, up 32 points or +0.79%.
In the end, there has been a giant rotation going on: Sell the Dow and buy the S&P/Nasdaq/ Russell. In terms of the ES’s overall tone, it was firm but not as firm as the Nasdaq. In terms of the ES’s overall trade, volume was on the high side at 2.2 million contracts traded.
NYSE Breadth: 66% Upside Volume
Advance/Decline: 70% Advance
Combined with post-EPS weakness in AAPL, GOOGL, and AMZN, and a robust jobs report, we have some weakness across the board.
S&P 500 — ES
The Globex low is 4138.50 and yesterday’s low is 4136.75. In other words, this level matters.
If we go daily-down and can’t reclaim ~4137, then last week’s high is in play near 4110. If that’s the case, I can’t help but notice the third rejection from 4180-4200 in as many quarters.
On the upside, bulls need to take out 4178 if they want to see this go higher. Then 4200 is in play.
We got a bit extended in the SPY yesterday, so like the ES we will have to watch yesterday’s $412.88 low. We are near that mark now in pre-market trading.
This level could act as a low-risk pivot for traders on both sides of the ball today, however, if we trade below this level and fail to regain it, the $410 breakout level is in play, then $408.16.
It took a lot of work to get $410+ and it would do bulls well to hold it into the weekend. If we do see $410, I expect it to be good for an intraday bounce, at the very least.
On the upside, I expect $413.70 to $414 to be potential resistance, at least initially.
As for the QQQ, a pullback here is healthy. Keep a close eye on the $303 zone. There we have the gap-fill from Thursday and the 50% retracement of the two-day bonanza it has enjoyed.
An overshoot puts $300 back on the table.
Otherwise, as deflating as it would feel, a “reset” back down to the $293 to $295 and/or 10-day moving average would be rather healthy and give us some great long setups in tech.
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.
NKE — Down to ⅓ or less as NKE cleared $130 yesterday. B/E stop or $126 is fine. Either exit the rest or hold for a potential runner as Nike bases nicely.
NFLX — 3 trims on Wednesday, now make sure you’ve got a B/E stop (or better) and fish for $369 to $370+ on the final tranche.
*Feel free to build your own trades off these relative strength leaders*
Disclaimer: Charts and analysis 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!