Please keep a lookout for this week’s video. We hit a snare with the rendering, so it’s likely it will not be ready before the newsletter & it will come in a separate post!
Our View
Economists expected that the consumer price index (CPI) rose 8.1% in April from the same month a year ago, decelerating from an 8.5% annual rate in March. It rose 8.3% instead. I think the story here is, it’s a one-month blip that is not going to last! CL is trading $104 as of this morning.
Our Lean
With all the margin calls, liquidation, and rolling options positions lower, I think it’s possible to see higher prices.
If the ES gaps up, my plan is to sell the open or the first rally above and buy the pullbacks. While I think lower prices as part of the “bigger picture,” I also see support in the ES at the 3950 to 3975 area.
I continue to hear people say they think the ES is nearing a low and I am in total disagreement with that idea. I have been calling for 3800 and lower and I’m not changing my view at this time.
I think this summer is going to be one for the history books.
Daily Recap
The ES opened Tuesday’s regular session at 4050, rallied up to 4065.50 in the opening minutes, and then dropped down to 4023.25 at 9:51. Then it rallied 32 handles to a lower high at 4055 at 10:08 before the sellers took over. For the next two hours, they dominated the tape, driving the ES lower by 102 points before it bottomed at 3953 just after 12:30.
Then it was the bulls’ turn, as they rallied the ES 84 points off the low as it climbed as high as 4037 at 2:00. After a quick 34-handle pullback and a 28-point bounce, the ES fell another 47 points down to 3985 and went into the 3:50 cash imbalance at 3995.
The MIM showed $2.1 billion for sale, traded down to 3987.25, rallied up to 4001, and traded 3995 on the 4:00 cash close. It settled at 3991.50 on the 5:00 futures close, up 9.25 points or 0.23% on the day.
In the end, the markets continued the pattern of failed rallies. In terms of the ES’s overall tone, it was weak. In terms of the ES’s overall trade, volume was high at 2.2 million contracts traded.
- Total Range: 112.50 points
- H: 4065.50
- L: 3953
Technical Edge
- NYSE Breadth: 58% Downside Volume
- NASDAQ Breadth: 52% Upside Volume
- VIX: ~$32
In back-to-back sessions, it’s clear the market is trying to find its footing. The key word here is “Trying.” If it can do so, then we could be looking at a decent dead-cat bounce here.
The CPI report just came in a little hot and higher than expected. That could kill this bounce before it even gets going. But if we rally on bad news, that could have meaningful implications in the near term.
Now we find out how meaningful that two-day low really is.
Bonds are rallying again, meaning yields are in decline, while the VIX is coming in. The semi stocks are trying to rally and Bitcoin has found some support (at least in the short term).
Further, we have a number of two-day lows to measure against in many assets, including the SMH, SPY, QQQ, NVDA, ARKK, etc.
I am not a full-on bull by any means, but we have to be aware of the two-way flow and bear market rallies.
Game Plan — S&P, Nasdaq, Bitcoin, Individual Stocks
Today’s video hit a snag on the rendering but goes over the ES, SPY, NQ, QQQ, TLT, NVDA, SMH, ABBV, ARKK, AAPL and VIX.
So there’s a lot in there to unpack, but it’s on its way soon!
S&P 500
Clearing last week’s low at 4056 and yesterday’s high at 4065.50 could open the door up to the 4100 to 4130 area, a nice 30 to 60 point trade if the bulls can take momentum.
The risk range is wider on the futures vs. SPY or QQQ because of the Globex session, but if traders go by regular-hours trading and we open near this zone (4056 to 4065) and rotate through it, then we could have a low-risk long situation on our hands.
Granted, that’s a lot of “ifs” and “could,” but we have to be aware of the potential.
(covered in video)
SPY
Two-times daily-up over $406.10 could open the door to the $410 to $413 area. The bulls will need to get their dead-cat bounce going, but this one has potential.
If we gap-up — trading $403.50 in the premarket now — we could have a very solid risk/reward with this type of setup.
(covered in video)
QQQ
Inside day as QQQ struggled with last week’s low. A daily-up rotation over $305.76 opens the door to $310, then $313 and $317.
I know we’re in a downtrend, but we have a clear two-day low to watch and if we gap up into the $305 area, then we could have a very low-risk daily-up rotation play on our hands.
(covered in video)
Bitcoin
Again, Bitcoin is trying to build some steam and rally here. If it can, look for $33K first, then potentially $37K to $37.5K.
AR
Nice bounce from the 50-day, as flagged yesterday. Let’s see if we can get a rebound into the $35 area — the 10-day and 21-day moving averages.
I would go with a break-even stop or a stop against this week’s low to keep our risk low.
Go-To Watchlist
*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.
- DLTR — B/E stop hit (for me)
- AR — First target is $35, stop at Tuesday’s LOD (or at entry, if our basis is low enough).
Relative strength leaders (List is cleaned up and shorter!) →
- AR
- WMT
- PEP
- KO
- MCK
- BMY
- JNJ
- DLTR
- DOW
Economic Calendar
CPI just came in a little hot.
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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