Our View
The week ahead is not just about the “end of the quarter rebalance.” We have the Q4 GDP report on Wednesday and initial jobless claims on Thursday, which is also the end of Q1.
We also have an OPEC meeting on Thursday, which combined with the crude oil inventories report on Wednesday could really move the oil market. Oil has been a good trade for us lately (see the technicals below). Of course, Friday will be dominated by the ISM report and the monthly jobs number.
Unlike last week’s low-volume grind, I expect trading volume to increase this week.
Our Lean
While I still don’t think the low for the year is in, I would be happy if it was! My concern is that there are too many moving parts right now to declare either side a winner. Tweets like this suggest more upside could be on the way.
Right now there seems to be a lull in the action. However, with the intensity of the rebalance and all the key economic releases, it should be good for a lot of two-way flow. Sell the early rallies and buy the pullbacks today.
Daily Recap
The ES opened Friday’s regular session at 4520, rallied up to 4527, and then sold off to 4511.75 at 9:41. From there it rallied up to 4525 at 9:52 and then pulled back to 4513.50.
After the low, the ES rallied 25.50 points to the session high at 4539 and then dropped hard, plunging 46 points down to 4493.25 going into 11:30. That marked the session low. From there, the ES ground higher, trading back into the 4510 area. At 2:00, the ES traded 4515, then burst higher to 4531 and pulled back to 4506 just after 3:30.
As the 3:50 cash imbalance flipped to $910 million to buy, the ES rallied up to 4537.75 on the 4:00 cash close, nearly hitting new highs in the process. It settled at 4536, up 23.50 points or up 0.52%.
In the end, it was a choppy, low volume, upward trading day. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume continues to trend lower at 1.19 million contracts traded.
- Range: 45.75 points
- H: 4539
- L: 4493.25
Technical Edge
- NYSE Breadth: 61% Upside Volume
- NASDAQ Breadth: 47% Upside Volume
Friday’s trading range in the S&P was the smallest range we’ve had since Jan. 12. Volatility has been cooling off over the past week, although the VIX is still north of $20.
In a recent video, we talked about how the VIX struggles to stay in the mid- to upper-$30s. In that sense, it’s not surprising to see it lower, albeit it came with a much bigger rally in the market than many were expecting.
I don’t do technicals on the VIX because it doesn’t really work that well in my experience. But it’s into an interesting area here near the 200-day and the key $20 level.
Game Plan
Given the volatility of this quarter, I expect a massive rebalance trade going on in the days leading up to March 31. Personally, I would love a scenario where we get an inside month on the major indices, as pointed out on Friday:
That would give us a beautiful potential trade in April with a more firm rotation to the upside. I’ll keep you posted on that.
S&P 500 — ES
- Feel free to extrapolate the below levels to the SPY
I continue to focus on the 4540 to 4580 area. That’s the 61.8% retracement of this year’s range and prior resistance from February. 4539 is also last week’s high.
On the downside, we haven’t touched the 10-day in eight sessions. In combination with the 200-day would be a great potential dip-buying spot, IMO.
Nasdaq — QQQ
- Feel free to extrapolate the below levels to the NQ
On the upside, I’m watching ~$363 in the QQQ — which is the 50% retracement area of this year’s range — then the 200-day sma. That’s followed by $374 to $375, which is the 61.8% retracement.
On the downside, it could be a solid buying opportunity around $350.
Oil
Killer unload spot at the $115 area. Now leaning on the 10-day and 21-day, oil needs to find its footing.
Back over $110 puts $115 to $116 in play. Below today’s low and failure to hold the 10/21-day puts $103.50 back in play. Then $100 and the 50-day.
AAPL
Markets are tip-toeing higher this morning, but AAPL is gapping down. Watch $170. Apple has been a monster relative strength stock lately.
On the H4 chart, $170 is the 61.8% retracement of this year’s range and the rising 10-ema. If it fails, $166.50 could be in play.
Go-To Watch List
*Feel free to build your own trades off these relative strength leaders*
Numbered are the ones I’m watching most closely. Please look at these closely, as there are several updates (the most recent of which are noted in bold).
- PANW — Absolute beauty!! Definitely trimming ⅓ to ½ here at ATHs. Would love to see a further push to the upside. $645 to $650 is the next trim zone.
- BRK.B — If still in runners, $370 to $375 is last trim spot
- VRTX — Trimmed another ⅓ at $254 on Friday. Down to just runners.
- F — 2x weekly up rotation is triggered (from video). Looking for $17.50 to $17.80 as first trim area. Followed by the declining 50-day. Would love a gap-fill at $19.87.
- BMY — Look for $73.50 to $75 next trim spot!
- COST — Look for daily-up over $560.50.
- TECK
- TU — forming a nice inside week
- MCK
- MKC — Was watching $99+ but now an inside week forming
- CCK
- Energy —XLE, APA, CNQ, CVX, ENB, PXD — robust strength
- ABBV
- ADM, MOS
- CHKP, PANW
- AR
- DLTR — Flirting with weekly-up over $157.80 — $165 is the upside target.
Economic Outlook
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