Our View
I want to start this out by saying that the PitBull was talking to a stock guy that used to execute stock and option orders over 20 years ago and one of the things the guy asked was, am I still writing the Opening Print? I told the PitBull that I am not even 100% sure when I started doing it but I know it was a few years before I started traveling to Dubai to do Sheikh Mohommad’s futures and options business in 1996.
My wife has told me to can it so many times I can’t count, but there is no way I can do that.
Writing about all the ups and downs while I trade during the day is part of where I get my ‘feel’ for the S&P and on the times when I don’t write it, I do not have as clear a read. Everyone has their own way of reading the markets — be it reading the local newspaper or watching Bloomberg TV or just having a few beers with some friends and talking over some ideas.
I learned a lot from the trading floor, but the one thing I know is that if you want to make the money you have to do the work. I not only do the work, but I have done it for 30 years. You have to. There’s no other way to succeed in this business.
Usually, the S&P is less volatile on the upside but when it was going up over the last few weeks, it was doing it in big moves. The daily ranges have evaporated during the recent downturn, as has the volume. Maybe tomorrow will change that.
The Fed has not had official rhetoric as of late, but recent comments from Neel Kashkari, the president of the Minneapolis Fed, were hawkish. While the market seems to be celebrating the slight downtick in inflation, it does remain high and that’s a concern for the Fed.
Further, we are not seeing the best earnings reactions lately. NVDA and CRM are down this morning after reporting last night. Macy’s and Nordstrom are both lower since reporting, indicating some concern on discretionary spending. Dollar Tree and DG are slumped this morning too.
So there’s a lot to digest and I think investors are starting to worry about a potential move lower again. However…
Our Lean
I am not sure whether the recent 218-point selloff is actually the beginning of the next leg down to a new low or just a normal pullback after a 600-point rally. You could make a case for both outcomes. That’s why so many traders are waiting to hear from the Fed tomorrow.
Last night the ES initially traded higher, but a little after 2:00 am the futures rocketed up to 4186.25, up more than 27 points in just a few minutes. Our lean is you can sell the early rallies and buy the pullbacks or just buy the 20 to 40-point pullbacks. The 50% retracement from the 4110 low to the recent high at 4327.50 is 4219. That may be the upside if we get that far.
That said, it’s not just US stocks that are on the move. The DAX has been all over the place, crude oil is trying to find a direction and even currencies are on the move with the euro making new multi-year lows against the dollar. The point is, everything is moving. As I have said many times, “These are not our father’s markets or charts.” Use stops, and learn to live another day.
Daily Recap
The ES opened at 4128.50, dipped about 7 points to a regular session low of 4121.25, then climbed 22.50 to yesterday’s resistance area between 4142 and 4145. The ES dipped 12.25 just after 10:30, then burst higher by 27.25 points and hit its regular session high of 4158.50 just before noon.
The ES then pulled back ~23 points, climbed 7.5 points, and was rejected by yesterday’s resistance zone again, this time at 1:10. It fell 10.5 points, bottomed near 4132, and rallied 9.5 back into resistance.
A more shallow dip sent the ES down to roughly 4135 at 2:40, then it powered higher 18 points and through resistance. Interestingly, the ES traded 4149 at 3:50, as the MIM came out with $250 million for sale. That grew to more than $1.2 billion for sale and the ES moved lower as a result. However, it found support and the 4142 to 4145 area and closed at 4143.75.
After the close, the ES climbed higher and settled at 4149.50 at 5:00, up 12 points or 0.3% for the day.
- Daily Range: 47.75 points
- H: 4158.50
- L: 4110.75
Technical Edge
- NYSE Breadth: 74% Upside Volume
- NASDAQ Breadth: 78% Upside Volume
- VIX: ~$22.75
Game Plan: S&P, Nasdaq
This really comes down to the Jackson Hole event. We had a quick two-day dip on Friday and Monday and have basically done nothing of note since.
The market is pressing higher today, bouncing off some larger support levels, but struggling with short-term resistance.
It’s tempting to just say, “let’s wait until Monday” because the market is not going to decide what’s in store for us until we hear from the Fed. In essence, it will want to know if the Fed plans on staying hawkish or if there’s some wiggle room to lighten up on rate hikes and become a bit more dovish.
Until then, let’s look at those support/resistance levels.
S&P 500 — ES
Notice the way the ES popped into the 4180s overnight, but is struggling with the 10-day and 21-day moving averages. Are these measures going to become resistance?
If so, that’s a problem.
On the flip side, the 10-week moving average was support this week. So the ES is caught between two key areas and it’s likely going to be up to the Fed to resolve which way this cracks.
On the upside, the overnight high at 4187.75 is key. Above that gets us 4200+
On the downside, anyone who reads the Daily Recap knows how key the 4140 to 4145 area has been over the last two days. Bulls want that level to act as support if we pullback today. Below that opens the door down to the 4110 to 4120 area.
Below 4100 and the ES loses a lot of bullish momentum.
S&P 500 — SPY
The SPY pulled back and hasn’t really given us a bounce to work with. As of 8:30 am, it appears we’ll get some reprieve this morning. However, if it can’t reclaim the $416 to $417 area, it certainly remains vulnerable in my view.
Below $410 and the $396 to $400 area becomes a real possibility in the days ahead.
Nasdaq — NQ
I don’t know the last time I saw an inside day on two candles that looked nearly identical on the NQ.
Trapped between 13,020 on the upside and 12,820 on the downside, we just have to see which way this resolves. Obviously the NQ has some bullish momentum on Globex, but it’s struggling to get above and stay above 13,020. If it does, 13,085 is in play (the overnight high).
Above that and the 13,150 to 13,200 zone is on the table.
On the downside, a break below 12,820 and failure to reclaim it creates an issue for the bulls.
Nasdaq — QQQ
Very tight chart and very simple ranges.
Below $313 and this one goes lower.
Above $317 without reversing lower opens the door to $320.
HRB
We have enough open positions right now ahead of the Fed that I’m comfortable with. However, if HRB clears $46.80, traders can justify a long position.
Conservative traders can use yesterday’s low as their stop. Otherwise, $44.75 is a reasonable stop-loss level.
Go-To Watchlist — Individual Stocks
*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.
- UUP — Down to ¼ position as we hold for potentially higher prices. Raise stops to $28.40 to $28.50.
- CHNG — second target of $25 hit. Now down to just ⅓ position. Take all profit here or move to a B/E stop and look for $25.50.
- Still looking for $25.50 on the upside, but can be back up to a ½ position or more $24.73. $24.25 is a reasonable stop-loss for those that added.
- APLS — HALF position at $65. Stopped at $63.50.
- AR — Out ⅔ of position after hitting our second target at $44. B/E stop. Might as well look for $46.50+ for the rest.
- O — long from $70.50, as mentioned in yesterday’s midday update. $72.50 is our first upside target. $68.75 is a reasonable initial Stop-loss.
Relative strength leaders (List is cleaned up and shorter!) →
Top 5:
- HRB
- PEP
- XLU
- CI
- MCK
The Rest:
- CNC
- F
- BMRN
- APLS
- ENPH
- TAN
- FSLR
- LNG
- PWR
- CHNG
- CELH
- COST
- UNH
Economic Calendar
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