Our View

No matter what anyone says, there has never been a time in history that the S&P moved so much. I was asking some traders that were in the S&P pit in the early 1980s about how big the ranges were and they said the SPU moved 2, maybe 3 points a day and it traded in nickels, like 100.05 bid at 100.10 offer. Today the ES moves in 2 to 4-point clips. 

Unlike the last few bounces, this one has rallied 170 points in 1.5 days — early bullish price action — and we’re almost 500 points off the low. It’s not just this rip that sticks out; there have been a few drops that quickly found buyers. Further, the market rallied on the Fed rate hike and it shook off earnings and revenue misses from GOOGL, MSFT, and others. It feels like it wants higher prices. 

I was talking to the PitBull about ES 4110 early yesterday, but I have to admit it, I had no idea the ES would rally that far, that fast. We had a very limited Technical Edge section yesterday that outlined 4100 as a key upside level…but even then, we said it could get there “this week,” thinking we may need two sessions (yesterday and today) to accomplish it. 

I really think there are only two ways to trade the ES: Take a stand and hold the position (swing) or get in and out and call it a day (scalp). 

The PitBull and I often talk about how futures day traders are outgunned, that the constant ‘cross fire’ programs make it almost impossible to be consistent, and that even if you have the ‘right idea’ that doesn’t mean you won’t get stopped out then watch the markets go your favored way. 

All I know is when I had the UBS trading direct line in my hand and I had 1,000 S&Ps to sell, I could totally create havoc in the S&P pit if it wasn’t executed correctly. But today’s programs come from everywhere all day long. There is no ‘vig’, no slippage, no getting between the bid and the offer, and most of all…no fighting it.

Our Lean

The ES made a contract high at 4808 on January 4th and made a low at 3639 on June 17. That is a ~1,170 point (or 24%) drop and the halfway retracement of the move comes in at ~4224. I am taking the rally one day at a time, but we could be in for more upside. 

Our lean: If the ES opened near yesterday’s high my lean would be to sell the open again. On Thursday, that trade for the Lean and it was good for 40+ handles. 

If that pans out, I’m looking to buy the pullback in the first part of the day and be on guard for some type of late-day walk away. This doesn’t mean we think the high is in, we just think with the S&P up 5% from Tuesday’s low, there could be some selling late in the day. 

Daily Recap

The ES had a quiet Globex session, but then rallied up 4033.75 at 9:29 am and open Thursday’s regular session at 4031.50 and traded up 4041 — a point off Wednesday’s high. From there it dropped ~45 points down to 3996.25 at 9:54. The ES rallied back up to 4013.50, sold off down to 3997.25 at 10:13, rallied up to another lower high at 4008.25, and then traded down to a new low at 3994.50 at 10:27. 

From there, bulls took over as the ES ripped up to 4058 at 11:45, up 63.50 points off the low. The ES pulled back down to the 4046 level and then back and filled for the next 30 to 40 minutes at 4059.25 at 1:17. After another small pullback, the ES made a new high at 4077.50 at 1:58. The ES pulled back down to 4067.25 at 2:15 and then lumbered back up to the 4075 area at 2:56 and then did another slow grind up to 4081.25 at 2:07 and traded 4069.25 at 3:42. 

It traded 4074.50 as the 3:50 cash imbalance showed $1.12 billion to buy and traded 4073.50 on the 4:00 cash close. After 4:00, the ES ripped to 4111 after AMZN and AAPL reported earnings and settled at 4105 on the 5:00 futures close, up 50 points or 1.2% on the day. 

In the end, there was an initial selloff and then a freight train on the upside. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, it was the highest-volume day in over two weeks as 1.95 million contracts traded hands.

  • Daily Range: 116.50 points
  • H: 4111
  • L: 3994.50

Technical Edge

  • NYSE Breadth: 74% Upside Volume
  • NASDAQ Breadth: 69% Upside Volume
  • VIX: ~$21.75

Game Plan: S&P 500, SPY

The markets are going to open a little hot today, with AMZN, AAPL, and big oil (CVX and XOM, which are ~45% on the XLE ETF) all up after reporting earnings. 

That said, there are some mixed signals out there too. INTC and ROKU are down badly after reporting earnings, while ARKK continues to languish. 

While “that’s okay” for us, ARKK’s drag shows that there is some lag in growth assets. Typically, we like to see these stocks showing some leadership, furthering the idea that investors are embracing a “risk-on” attitude. 

We’ll see what today brings, but the major indices are approaching some major zones. Yesterday’s rally was impressive, but the breadth was not. 

S&P 500 — ES 

I thought we could see 4100 this week, but I did not think we would get another 60-handle rise in the ES on Thursday!

The ES is now running into prior support near 4100 (hence that being the target yesterday), as well as the 21-week moving average. 

Just above this area, we have the June high at 4189 — not that it will matter that much once we start August trading next week — as well as the weekly VWAP measure. Lastly, the 4100 to 4200 zone was a big support area throughout Q1 and the first half of Q2. But in late-May early June, it became resistance. 

I tend to view support as support until it fails…and resistance as resistance until there’s a breakout. 

For now, I’m going to look at this area as possible resistance until the ES can push above it. 

S&P 500 — SPY 

Like the ES, we also got our test of $407 we were looking for yesterday. That was prior support in late May and early June before it failed and the market moved lower. 

From here, I mostly want to see how the SPY trades from here. An open above $407 and yesterday’s high and a fade back below it would have me cautious about the short-term — especially if the SPY can’t recover this area. 

Ideally, I would like to see the SPY stay above $400. The 21-week moving average looms around $410.50 and could be resistance. 

Nasdaq — NQ

All of these are similar to me. The NQ is rallying toward 13K, which was a prior support level turned resistance. 

I am cautious as a result. If it can clear 13,200 — and thus the 50% retracement, the June high (and the July high if the move comes next week), the 21-week moving average and the weekly VWAP measure — then I will be a believer on the move to 14,000 to 14,250. 

For now though, I’m cautious.

Nasdaq — QQQ

$314 to $315 is a possible resistance area. Above that could put $318 in play. On the downside, $300 to $296.50 is a key area for me. If it fails, bulls will lose a significant amount of control. 


This one trades a little less volume than I’d like, but the setup looks great. The breakout level is $24 with the 10-day near that level as well. If we get a dip to this zone, I’m looking at a buy with stop-loss probably near $23.25 to begin. 

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.

Trade Sheets: We have been limited in the quantity of trades this month, but not limited in quality!! Some really nice moves lately. 

  1. MCK — We have hit two trim zones so far on MCK. Feel free to cash the last ⅓ of the position as you see fit. $335 to $340 is a potential upside target (and has since been hit). 
    1. Moving stop-loss up to $315 and given the consolidation, I am thinking of holding my last ⅓ for a push to $348 to $350. 
  2. PEP — Beautiful move into the $175s! I am trimmed down to a ½ position with a break-even stop & looking to trim down to a ⅓ or ¼ position into $177 resistance. 
  3. COST — Absolute banger of a trade, now trading $535 plus and we are down to a ⅓ position. I would consider moving to a stop-loss of ~$520 (profitable vs. our cost basis) and just letting this one ride a bit. 

Relative strength leaders (List is cleaned up and shorter!) → 

  • O
  • CNC
  • HRB
  • ENPH
  • CHNG
  • COST 
  • PEP — 
  • BA — beauty 
  • ABBV
  • UNH
  • XLE
  • VRTX — really nice action lately.
  • MCK — trying to break out. 

Economic Calendar

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.

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!



Comments are closed