That’s not me in the green shorts, but it could be! Sometimes that’s what this game feels like — a big game of whack-a-mole for the last four to six weeks. I told the PitBull that it’s a lot easier to write about trading than it is to trade it.
Most of the retail futures traders jumped over to the options because as the swings get wilder and the ranges get wider, options seem like an easier way to manage risk — even though premiums have gone through the roof.
There has been big money made in the options and that goes all the way back to my days on the floor. But for an old floor dog like me to stop what I was doing to learn options didn’t make sense. It was easier just to hire a few smart college-educated desk guys that did.
Yes, there have been some times when I did see something coming and bought some calls and made money, but there were also times that I bought calls and the futures rallied and I still lost money. The options can be fickle.
If you asked the option traders on the floor, they would tell you they were way smarter than the futures guys, but don’t kid yourself, they were a lot of really smart futures traders that made a ton of cash — they just never said much.
Anyways, I was doing fine trading the ES right up to the end of April. Over the last month though, I seem to be up and down the same 10 grand, and last week, the losses piled up. And guess how I lost most of the money? Shorting when I was not long — fighting the trend — and getting long after the ES already rallied.
Our Lean
Despite my troubles as a flow-trader over the last month, the Our Lean has actually been pretty on point. If only it were easy to stick to the plan we lay out here each morning, instead of trying to read all the rips and dips throughout the day.
I know I just talked about the last month, but just look at the past week. We had that nice three-day rip with the big upside breadth volume. Since then though, it’s been one big chop fest as the S&P consolidates.
Today’s Our Lean is simple: We need to watch the weekly range on the ES, at 4202 and 4071.50.
I feel strongly that we could have another down leg, but I am not blind to the idea that this rally could have legs. We have been stuck in a falling-volume chop zone. Will that continue until this Friday’s CPI report?
I don’t know.
But we need to break this range before any meaningful action can get underway. Otherwise, we will just keep chopping. Watch 4071.50. A break of that level could put 4020 in play, then 4000.
Daily Recap
The ES closed weak on Friday after the jobs report, then rallied during Globex, climbing 47 points to ~4156 overnight, and opened Monday’s session at ~4150. The ES climbed to 4168.25 after 10:00 and chopped in a 10-point range for the next hour.
But the bulls couldn’t hold on.
The ES puked 37 handles down 4129.50 at 11:15, bounced 15 points, then fell another 34 points just after 12:30. From there, longs mustered up a stronger bounce, with the ES rallying about 30 points back up to 4140. The gains didn’t last through, with the ES falling 33 points back down to near lows at 4107.25 at 3:30.
The ES went into the 3:50 MIM reading at 4114.50 when the cash imbalance showed $525 million was for sale. It rallied 11.50 to 4126, closed the 4:00 session at 4119.25, and settled at 4120.75 on the 5:00 futures close, up 13.5 points or 0.33%.
In the end, the ES opened strong and closed weak. In terms of the ES’s overall trade, volume was again on the low side, at 1.42 million contracts.
- Daily Range: 63.75 points
- H: 4168.25
- L: 4104.50
Technical Edge
- NYSE Breadth: 63% Upside Volume
- NASDAQ Breadth: 53% Upside Volume
- VIX: ~$26
Sometimes the best trade you can make is protecting your capital.
As Danny said above, we really need to keep an eye on the ranges. A break of last week’s range that doesn’t reverse (i.e. not just a crack or “look below” last week’s low or “look above” last week’s high) could accelerate the move.
Meaning a weekly down rotation could really get the selling starting and a weekly-up rotation — now 118 handles from current levels — could rejuvenate the rally.
Game Plan — S&P 500 (ES), Nasdaq (NQ), Bitcoin, AAPL, DLTR
S&P 500 — ES
ES — again, boring. I know. But it’s the same setup as Monday, only now we’re trading down into the 10-ema on the daily.
If it loses last week’s low at 4071.50, then it opens the door down the 21-day moving average, then the 50% retrace.
Above the Globex high of 4124 and perhaps the ES can make a charge at Monday’s high up at ~4168.
For SPY, watch the weekly range from Monday’s plan.
Nasdaq — NQ
Same setup as the ES. The only difference is the prices. Weekly down below 12,440 opens the door down to the 12,220 to 12,250 zone, where the NQ finds its 21-day moving averages and the 50% retracement.
Over the Globex high of 12,615 and the NQ can push higher, perhaps to the 12,750 to 12,800 area.
Bitcoin
Bitcoin has been oddly quiet these past few weeks. That is somewhat concerning for longs, as it sits on the 61.8% retrace and key support. One would think we would get a more robust pop from this one.
If Bitcoin trades below $29,180, bulls need to be cautious. Below $28,750 could open the door down to last month’s low at $25,400. Below that and the 200-week moving average is on the table, followed by a retest of the prior all-time high near $19,650.
On the upside, last week’s high is on watch at $32,375. Even if we go weekly-up, the declining 10-week moving average is of concern. Be careful in crypto right now.
AAPL
Apple had its WWDC event yesterday, but is not reacting as well as some bulls had hoped. The damage was done on Friday, with the stock’s ~4% slump and close below the 10-day and 21-day moving averages.
From here, AAPL needs to hold $144. Below that and failure to reclaim it opens up $140, then the $136 to $138 support zone. On the upside, bulls want to see a close above the 10-day and 21-day moving averages. Over $148 puts the key $150+ level in play.
You don’t have to trade Apple, but with its $2.4 trillion market cap, it’s a good idea to keep an eye on it. If it rallies, it can lift the market. If it falters, it can drag the Nasdaq down with it.
DLTR
Lastly we have DLTR, which continues to trade well since reporting earnings. Let’s see if this stock can dip to the 10-ema and the post-earnings low at $155.64 and hold these levels as support.
If we get that setup and a bounce, I would look to trim some near the 50-day moving average. More conservative bulls may consider trimming earlier between $158 and $158.50.
Go-To Watchlist — Individual Stocks
CTVA — Triggered.
XLE — Watching for potential dip-buy setup.
XOM — Also watching for the same dip as XLE.
AR — Setup still intact. Stalking it
*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.
We have been spanking the very select individual trades we have taken. For that, I’m super grateful! It shows that discipline wins out in a tough tape.
- AMD — Weekly-up at $104.55 triggered, First target achieved at $109.50. → Now look for $115 to $118 next & breakeven stop-loss.
- DXY / UUP — Trimmed into 27.50 as the first target. Now looking for $27.70 to $27.75.
- CTVA — triggered long. → Needs to hold $61 now (just below last week’s low).
Relative strength leaders (List is cleaned up and shorter!) →
- These three are on watch for dip-buys:
- XLE / XOM
- AR
- CTVA
- DLTR
- VRTX
- AMGN
- MRK
- MCK
- JNJ
- BMY
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.
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