Our View
Sometimes small men need big shoes and that’s who Vladimir Putin is. He always speaks about “our American” partners, but that is all a front for his KGB background and Russia’s constant meddling.
Like China, Russia has been hacking top secret information from the US and other high-level companies for the last 40 years. And like North Korea, Russia continues to build up its nuclear arsenal because there is no way either country could stand up to the US military.
I remember 15 years ago Putin said he would continue to upgrade the military and its nuclear capabilities as a deterrent to the US and the Nato border encroachment. I don’t believe Putin cares one iota about attacking Ukraine during the Chinese Olympics. If he told Chinese President Xi otherwise I doubt the Chinese leader would scold him.
Kun Wang is in China and works with MrTopStep. Two weeks before the Olympics he told me that Xi was going to tell Putin not to invade. He also said China will not start a war with Taiwan and sent me a picture of factory workers making Trump 2024 campaign signs.
That all said, with the US still reeling from the Covid-19 pandemic, Putin is most definitely testing the waters. That’s why things have been so haywire. The US headlines saying Russia was moving rockets into position and was going to attack Ukraine on Wednesday sent the already-weak S&P lower and dropped the NQ down almost 300 points from its high.
Right now everything seems so disjointed that any major disturbance will send shock waves through the US and European stock markets. As I have said for the last 25 years, the S&P hates uncertainty and clearly that has reached a fever pitch.
In closing, I remember having a discussion with PitBull about the stock market selloff in 1976. I was not around back then, but the Bull had to be in his early 30s. When we started talking about the 1987 crash, he said it was one of his all-time best trades — by getting out of a loser! Then he started talking about 1973-74, which was complicated by the Arab oil embargo.
My point being, you can see how the market traded through that turmoil — and many others both before and after. The rallies were big, but they were ultimately sold into as we hit new low after new low over a lengthy period of time…not days and weeks, but quarters and years.
Many of you have known me for a long time.
I am not trying to shed gloom and doom, but the S&P is only down 7.65% this year and keep in mind, it rallied 27% in 2021. I know it’s not what the bulls want to hear, but they are going to have to ride this storm out a little longer. There are just way too many moving parts.
Our Lean
I think ES 4420 is big. If the ES can close above there, it could signal higher prices in the short term. Yesterday’s rotation was to sell ES / buy NQ, so let’s be on the lookout for the opposite today. There are also a lot of buy stops above 4420, so while it’s resistant, don’t forget about a possible stop-run above there. On the downside, it’s the 4350 area.
To tell the truth, I don’t know what’s going to happen. However, if the ES gaps higher tomorrow I may look to sell it. Ideally, I want to get a look at where the ES is at 10:00, but my gut says we may have some type of turnaround Tuesday.
Above 4420 and we could run to 4450. Above that, my levels are 4480 then 4530.
- Several of you mentioned having some sort of midday/late-day update. We will see if that’s something we can incorporate for our premium members.
Stats to the February Opex week historical February stats for the week.
Daily Recap
Total Range
- Open 4411.75
- High 4428
- Low 4358
- Close 4394
- Volume 2.053 million
After trading down to 4354.50 on Globex, the ES traded 4403 on Mondays 9:30 ET futures open.
For as choppy of a day as it was, the ES was rather controlled. It bounced between its Globex range with 4420 acting as resistance and 4358 to 4460 acting as support. In between, last week’s low at 4393 was key amid the chop.
Just after 3:00, the ES printed 4372 and at 3:34 it traded 4403 — where it opened — as the early MIM was showing over $600 million to buy. On the 3:50 cash imbalance, the ES traded 4402.25 as the MIM flipped to $1.4 billion to sell and traded 4394 on the 4:00 cash close.
It settled at 4394.50 on the 5:00 futures close, down 23.5 points or 0.53% on the day.
In the end, it was a day filled with 20 and 30 point rips and dips. In terms of the ES’s overall tone, the ES lagged behind a firmer NQ even with the bonds under pressure again. In terms of the ES’s overall trade, 466,000 ES traded on Globex and 1.595 million traded on the day session for a total of 2.061 million contracts traded.
Technical Edge
- NYSE Breadth: 75% Downside Volume
- NASDAQ Breadth: 60.2% Downside Volume
We remain in a headline-driven market, which for most traders (myself included) is not an ideal environment. Why? Simple. You can’t account for headlines. They might be bullish (like this morning) and they might be bearish (like yesterday around 1:20 ET), but they blindside the market and that’s always tough.
One day we will get back to a trending market, but until that’s the case, my suggestions are:
- Trade with smaller position size
- Be quick to take your first price target and raise stops
- Be willing to trade less and only take the high-quality setups. When in doubt, stay out. There’s nothing wrong with saying “I have no edge today.”
- Zoom in on your timeframe. A lot of people will say “zoom out” — myself included. But during these whacky environments, it can be nice to trade an intraday setup and go home flat with little to no overnight exposure.
Game Plan
The Russia threat is dying down (for now) and jolting the S&P higher. The market is now also bracing for a 50 bps hike in March, instead of just a 25 bps hike.
S&P 500 — ES Futures
- Feel free to extrapolate this layout to the SPY.
I apologize for the busy chart above.
The blue retracements are for the larger range and the red retracements are the current range. In that respect, here are my upside levels of interest:
- 4450 to 4467 — 200-day, 21-day and 10-day moving averages.
- 4470 — the 50% retracement of the current range.
- 4496 — the 61.8% retracement.
- 4510 — key level last week and 50% retracement of the large range.
Downside levels of interest:
- 4428 — Monday’s high.
- 4393 — Last week’s low and key so far this week.
- 4354 — This week’s low.
Nasdaq — NQ Futures
- Feel free to extrapolate this layout to the QQ.
Doji-daily-up on the NQ but happening pre-open.
Upside Levels:
- 14,550 — 10-day and 50% retracement of current range.
- 14,670 — 61.8% retracement.
- 14,770 to 14,800 — resistance.
Downside Levels:
- 14,394 and 14,367 — Monday’s high and the Q4 low, respectively.
- 14,181 — Last week’s low.
- 14,031 — This week’s low.
Individual Stocks & Go-To Watchlist —
Feel free to build your own trades off these relative strength leaders
We had just one trade yesterday posted here and it was on ABBV. Despite a little bit of turbulence in the beginning, it worked out pretty darn well. Here’s an exchange I had about ABBV with a trader I have a ton of respect for and kind of walks through the trade a bit.
ABBV — trim some into this opening pop.
TD also gave a great opportunity on the long side yesterday and has been on our Go-To list for a while now.
If I’m being honest, the charts for individual stocks still have a lot of work to do to repair the recent damage and one gap-up doesn’t change that observation.
Go-To Watch List
- TSN — post EPS reset — not happy to have missed this one y’day
- BAC, WFC and other banks are trading well. ASB, MET, MS
- Energy — HAL, OXY, XOM, CVX. Let’s maybe give this group some time. Strong names can be watched for a test of the 21-day and/or reclaim of y’day low if we gap below.
- BRK.B
- ABBV — 261.8% extension is $147-ish
- CVS — nice bounce of the 50-day
- DE
- TD — nice response. Let’s see if it can bounce further. H4 up over $84 is on my radar.
- V & MA — Resetting now. See if a bid comes in soon
- BROS
- MKC
INTC
INTC is gapping up about 1% in the premarket on news of its $5.4 billion acquisition of TSEM.
However, if Intel fades and goes daily-down, it will be hard not to look for it to retest last month’s low at $46.30.
Above the 10-day could give us last week’s high and 21-day moving average near $50.
Economic Outlook
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