Our View
This market is not easy. In Thursday’s late-morning session, I thought the ES would take out 3800 (when it was trading below it) and then reverse down, potentially to the 3720s.
So I offered 3799 and 3809 — and both filled. I put in a stop at 3821.50 and wouldn’t you know it, the ES ran it by a point to the high of day and reversed. Then the ES fell back to 3766 and it took out 3750 during Globex.
Of course, I regressed back to the old, “I’m not short so I’m trying to buy it” mindset. That was after it sold off down to the 3881 level.
Like I always say, trading and life have a lot in common — it’s all about timing. I can blame it on the CHOP but in reality, it was just bad judgment and forcing trades. I ended up making most of my losses back yesterday, but I’m not here to make losses back, I’m here to make money.
Our Lean
I am writing this just after the close. If the ES pulls back on Globex, I may try a long for the first trading day of July. But here’s the problem. The futures may have a good day, but who’s to say it won’t fall first? That’s kinda how you have to look at it.
Our lean is to ‘try’ and buy weakness today understanding two things. 1) Everyone will be trying to buy and 2) Just because it’s the first trading day of the new quarter, don’t forget… it’s FRYday!
Daily Recap
The ES sold off down to ~3760 and opened Friday regular session at 3788 on the 9:30 ET futures open. The ES traded up to 3786.25 right after the open and then sold off down to 3741.25 just after 10:00. After the low, the ES rallied almost 60 points up to a new daily high at 3800.00 at 12:03, pulled back to the 3785 level, and then rallied almost 40 points up to a new high for the day at 3822.75 at 12:33.
After the push, the ES sold back off down to 3793, rallied up to a lower high at 3821 at 12:54, then dropped 54 points down to the 3767 area at 3:16 as the early MIM showed $1.2 billion to sell. Just after the low, I put this out in the MTS forum:
IMPRO: Dboy :(3:20:04 PM): my guess is they pop a little now.
Just after that, the ES quickie-rallied up to 3798.75 and then sold back down to the 3781.50 area. The ES popped up to 3791 as the 3:50 cash imbalance showed $950 million to sell and quickly sold off down to the 3770.50 level at 3:55, rallied 27 points up to 3797.75 at 3:59, and traded 3789.50 on the 4:00 cash close. It was a wild close.
The ES settled at 3781 on the 5:00 futures close, down 40.25 points or -1.05% on the day.
In the end, the little chop turned into a big chop with the ES moving up and down 50 to 80 points. In terms of the ES’s overall tone, it almost feels like a win for the bulls, but the amount of chop you had to endure was difficult. In terms of the ES’s overall trade, volume was brisk at 2.28 million contracts traded — its first above-average volume day in 8 sessions.
- Daily Range: 83.75 points
- H: 3825
- L: 3741.25
Technical Edge
- NYSE Breadth: 22% Upside Volume
- NASDAQ Breadth: 31% Upside Volume
- VIX: ~$28.50
Now it’s Q3, July 1, and the day before a three-day holiday weekend. Everyone, please take these three next three days to recharge and get ready for a new quarter.
“You do you” and enjoy some extra time this week. Take today off if you want. It’s important to recharge the trading batteries.
Game Plan: S&P 500 (ES & SPY), Nasdaq (NQ & QQQ), Dollar
S&P 500 — ES
The ES overshot our 3705 “sell” zone a bit, but ultimately, the bears held where they needed to. Now it kinda looks like it’s in no man’s land.
On the plus side, it continues to hold the 61.8% retrace, near 3755, which was our downside target area yesterday. If we lose 3755, the 3741 to 4745 area is in play (which is yesterday’s low and the Globex low).
A break of this zone that isn’t reclaimed puts 3705 in play.
On the upside, the bulls need to reclaim 3800, then 3820 to 3825. The latter zone is where we’ll find the 10-day moving average and that has been resistance over the past few days. Above it puts 3845 in play.
It’s been a chop-fest the last four days, making it tough to “lean” one way or the other. The bulls keep preventing the ES from completely rolling over, but they are not doing so in a convincing fashion. So be sure to just go level to level.
S&P 500 — SPY
After four choppy days, there’s not much actionable insight on the SPY at the moment. It’s a crystal clear setup on the daily chart though.
Bulls need $380.50+ and bears need sub-$374.
The one thing I will say is that, if the bulls can actually hold the 61.8% retrace of the recent rally (like they did on Thursday) and rotate higher, we could be looking at a larger move to the upside.
Of course, that flies in the face of this year’s trend though, so I’m not holding my breath. It’s something to be aware of, though.
Nasdaq — NQ
The NQ has been dancing all-around 11,564. Check out the zoomed in too.
Now acting as a ceiling in the Globex session, continue to keep an eye on this mark. A move above that could open the door up to the 10-day, near 11,700.
On the downside, 11,350 to 11,380 is critical support. A break and failure to reclaim it could open the door to more downside.
MRK
I’m not trying to get too cute with the individual stock trades, but with a VIX that continues to persist near $30 and amid a bear market…yeah, I’m being picky. I’m trying to thread the needle and am fine with walking away from a setup if it’s not good enough.
For MRK, the stock is set to open below yesterday’s low of $90.91. I hope it does and I hope it tags the 10-day.
If it can do that, I will be long on a move back up through $91.
If the setup triggers, conservative bulls will use a stop-loss around $90 or the LOD. Aggressive bulls can use a stop as low as $88.75.
On the upside, I would like to see $94 to $95 as the first target.
DG
$243 has been clear support the last three days. A dip below and tag of the 10-day could get us the same setup as MRK.
Ideally, DG will hold $240.
$250 is the first upside target.
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.
The VIX remains stubbornly high, which really creates a tough situation for trading individual stocks. Despite that, we continue to carry two “stress-free” trades and have had some luck with others by securing some profit and getting stopped out at our entry (break-even).
- DXY / UUP — Still carrying ¼ of the original trade (cost basis: $27.20). On the upside, I’m still looking for $28.20+ to trim more.
- $28.50 to $28.65 is the next meaningful upside target.
- On the downside, we will operate against a B/E stop-loss
- 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 if it continues higher. Moving stop-loss up to $315
Relative strength leaders (List is cleaned up and shorter!) →
- *Look at the strength in health care*
- BMY
- MRK
- ABBV
- UNH
- JNJ
- XLE
- CLR
- VRTX
- DG
- IBM
- MCK
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.
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.
