The Opening Print Recap
The ES traded down to ~4657 on Globex and opened Wednesday’s regular session at 4660.50. The ES initially down-ticked, rallied up to 4665.25, then dropped down to 4658. In yesterday’s Our Lean section, I wrote:
“We’re not changing our stance until the market changes its tune: Sell the early rallies and buy the pullbacks with a bias to the downside. Look at the charts.”
That’s exactly what played out, while “the charts” showed a tired ES that needed a rest. That ES topped within the first hour of trading with the ES trading 4678.75 at 10:22, up almost 21 points off the low. It’s worth pointing out that 4680 resistance was called out clearly in the Mr. Top Step chat room.
After the morning high, the ES pulled back down to the 4671 area and traded in a 5- to 7-handle range from 10:35 to noon. That’s when things started to get slippery.
The ES finally broke down to ~4665 at 12:30, rallied back to the VWAP at 4669 then sold off down to a new low at 4660 — about 18 points off the high.
After a mild bounce, the ES took out the Globex low and traded down to a new low of 4650. The ES ultimately put in six straight declines on the 30-minute chart, dropping all the way down to 4625.50 at 2:45.
After the low, the ES made several higher lows as it clawed back some of the losses. It hit 4645.50 at 3:21, up 20.25 points from the low before pulling back 10 points to 4635 just before the MIM reveal. On the 3:50 cash imbalance, the ES traded 4642.50 as the final MIM showed $1.02 billion to buy and traded 4647.75 a few minutes later.
The ES went out at 4641.25 on the 4:00 cash close and settled at 4644.25 on the 5:00 futures close, down 31 points or 0.66% on the day.
In the End
All the early selling was used up before the markets opened, leaving the ES open to a short-covering rally. The big question was — and it was ultimately answered in the afternoon — will the ES hold the rally?
Answer: No!
In terms of the ES’s overall tone, I think the best way to describe it was “wishy-washy.” In terms of the ES’s overall trade, 246,000 futures traded on Globex and 1.33 million traded on the day session for a total of 1.576 million contracts traded.
**Bond Market Is Closed For Veterans Day**
The bonds are closed and the stock market is open for the Veterans Holidays, so I asked my good buddy Jeffery Hirsch from @AlmanacTrader to tell me what happens to the stock market on Veterans Day when the bond market is closed. He sent me this table:
As you can see, it’s a pretty bullish day. Again though, the simple question is, “will the rally hold?”
Our Lean
The PitBull has a rule about the monthly options expirations and looking for a Thursday / Friday low the week before the expiration. MrTopStep changed that rule to buying late-day Thursday weakness. This trade has a high win ratio, but like I said yesterday the price action has changed from looking for back-and-fill on the way up — aka buying the pullbacks — to selling the rallies.
However, the longer-term trend is still intact, even if we have some “wishy-washy” intraday action. Therefore, Our Lean is to buy pullbacks with tight stops. For what it’s worth, @RealTraderDave had 4620 as support, and yesterday’s low was 4625.
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.
Technical Breakdown — A Much Needed Refresh
There are days where “less is more” and the last few days have certainly been that way. We have been waiting for some type of consolidation and/or pause in the ES and S&P 500 due to the rampant run from the October lows.
Well, we’re finally getting it.
ES & SPX
The ES traded a bit sloppy on Wednesday and it didn’t give us that perfect dip down to the 8/10-day where it tags and bounces hard. We actually bottomed pretty hard in the NQ on the initial 10-day test, which came off the open and a few hours before the ES sold off in the afternoon. From the low to the high, it had a 180-pt bounce (and was called out live in the room).
In any regard, the ES broke the 10-day by about 15 points before bottoming and giving us that doji-reversal setup at around 3:00.
You can see the ES trying to push off the 8/10 day in the chart above. Below will not look like that, because the SPX does not trade overnight. We need the ES to clear 4660. That will open the door to the 4680 area, which was resistance on Wednesday. On the downside, it’s preferable that we hold 4645 to 4650.
On the SPX, I will be watching for a 4-hour rotation higher, which happens if the index can clear 4664. Based on the SPY, we will likely open near this area, so let’s see that the SPX doesn’t fade too hard and instead builds above this level.
If bulls gain momentum over 4664, then 4685 could be on the table.
IWM
As it pertains to the Russell or IWM, keep in mind just how powerful of a breakout we had here. All year long, the IWM had been struggling with the $233 to $234 area while the other indices continued to make new high after new high.
Then it burst higher, rallying to a high of $244.46. Now pulling back into the 8/10-day moving averages, we want to see support come into play. Let’s see if this one can push back over $240 by the end of the week.
Disclaimer: Charts and analyses 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!
Economic Outlook
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