But the S&P should open near a key area on the charts.

Follow @MrTopStep and @BretKenwell on Twitter and please share if you find our work valuable.

Our View

There are 11 months left in the year and I still believe the bias in the first half of the year will be selling the dead-cat bounces. I admit I could be totally wrong about this, but as I have always said, “the S&P hates uncertainty” and there is clearly an abundance of that floating around. 

I honestly do not think the S&P knows what it wants to do. Whether it’s trading in a 3838.50 to 3939.50 range or 3939.50 to 4050 (or higher), this is what most people call a choppy, range-bound trade or what the PitBull calls “water in the bathtub.” The algos push the ES (water) one way and then move it the other way and yesterday was a perfect example of just that. 

Additionally, after a big rally for the dollar, the greenback is finally under some pressure. That’s helping gold get a nice boost, which is an asset I expect to do well this year. China continues to sell its US bond holdings and buy gold instead. 

See the gold daily chart below: 

Our Lean

Last night, MSFT reported earnings. Initially, shares rallied on the results, but it turned lower in the after-hours after providing guidance. Is that going to be the theme among mega-cap tech? 

Our Lean: The ES has been shaking off the early weakness but is overdue to run the sell stops under 4000. Our lean is you can buy the early weakness and sell the rallies or just be patient and sell the rallies.

Remember, the ES tends to rally early in the day and early in the week during a bear market.

MiM and Daily Recap

The ES sold off down to 4013 on Globex and opened Tuesday’s regular session at 4018.25. After the 4009 low, the ES rallied up to 4030.75 at 9:55, traded down to a new low at 4005.25 at 10:06, and then back up to 4029.25 at 10:15. It didn’t know what it wanted to do — aka, what I wrote in Our View. 

From there, the ES pulled back down to 4013.25 and then rallied up to 4037 at 10:58. It pretty much stayed this way from 11:05 to 12:30 as the ES traded in a narrow range before resolving higher, climbing to 4038.50 at 12:46 and then trading back down to 4031.50 around 1:00.

The ES traded down to the 4022 level and traded 4025 as the 3:50 cash imbalance showed $380 million to sell, rallied up to 4035, and traded 4030.50 on the 4:00 cash close. After 4:00 the ES rallied and traded 4038.75 on the 5:00 futures close, down 3.75 points or 0.09% on the day.

Technical Edge

  • NYSE Breadth: 41% Upside Volume 
  • Advance/Decline: 48% Advance 
  • VIX: ~$20

Not a lot jumping out on the charts. We have a few open positions to keep working, but with today’s gap-down action across the indices, I want to see how they hold up first. 

If they hold, it may give some nice resets in individual stock trades. If they fold, we can shift to a more defensive state. That said, the S&P has some clearly defined levels to watch. 

S&P 500 — ES

More or less, the 4015 area held as support yesterday, but the bulls lacked any meaningful conviction on the upside. Now falling on earnings this morning, we come into the session down about 40 points. 

I am only interested in two real areas at the moment. That is 3980 and 3950-3960.

The first area is the 10-day ema and 50% retracement of the recent rally. It’s also this week’s low. 

The second zone is the 50-day moving average and the 61.8% retracement. 

One of these two zones (or perhaps both) should give bulls decent trade prospects today.


For SPY, it’s pretty simple as well. I want to see how the $395 to $395.50 area holds up. 

That’s the 50% retracement + the 200-day and 10-day moving averages. If it holds, it gives us a great bounce candidate, even if just for an intraday trade. 

If it fails, we’ll know quickly where the momentum is shifting.

Open Positions 

A note: After talking to some members, I want to make the setups a bit more clear. We are a trade-ideas service, but want to make entries & exits simpler to understand. We will be sending more updates, a few educational pieces and looking for a way to make our setups more clear in how we are managing them. 

  • 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. 

  1. 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).
  2. MRK — Long from $108.75 — first target: $111 to $112.50. Stop at $106.75 to $107.
  3. NKE — Down to ⅓ or ½ after yesterday’s $128+ Trim. Looking for $130+ to exit more/all. B/E stop. 
  4. GE — A lovely, textbook trade for us. A strong RS leader that pulled back into active support and bounced. Now down to ¼ or less and feel free to manage however you’d like as it rallies on earnings. 

Go-To Watchlist

*Feel free to build your own trades off these relative strength leaders*

Relative strength leaders →

  1. SBUX
  3. CAT
  4. BA & Airlines — AAL, DAL, UAL
  5. GE
  • CAH
  • SMCI
  • MRK — weekly
  • FSLR 
  • XLE — XOM, CVX, COP, BP, EOG, PXD — (Weekly Charts)

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.
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!



Comments are closed