Earnings, Fed Dominate This Week’s Calendar
“Thin to Win” can’t be ruled out.
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Our View
After the July options expiration, the Nasdaq rebalance and this week’s Fed meeting, I expect the air to come out of the tire. Meaning we are coming into the end of July and families everywhere will be rushing to take time off before the kids go back to school.
It feels like a short summer for the students, but for those worthy souls that are trying to navigate the S&P and Nasdaq, we should see things slow down. That should see lower volume and the resumption of the rally — AKA “thin to win.”
There are some big stock names reporting this week, but I think the Fed rate hike and follow-up presser with Powell takes the spotlight. We broke this down in Sunday night’s weekly preview.
Our Lean
This morning the Nasdaq will release the reweighting numbers. I’m not really clear on what the effects will be, but in the prior rebalances I believe the markets rallied after it was all said and done. It will reduce the weighting in top names like MSFT and NVDA and bolster some of the lower weightings, “likely in Starbucks (SBUX), Mondelez (MDLZ), Booking Holdings (BKNG), and Broadcom (AVGO), among others.”
MSFT, GOOGL and META report this week and traders will be watching the Fed, which will raise rates by 0.25 points and to the highest level in 22 years. I say “will raise” rates as if it’s a known certainty, but with the Fed Funds futures pricing in a 99.8% probability, I think we can safely consider it a certainty. It’s Powell’s presser that’s harder to gauge.
After ending the week on a down note, I think this week we will see a resumption of the rally. That said, there are some hurdles to get past as mentioned above.
Our Lean: I want to get a look at a Globex Sunday night and look for pullbacks to buy. For now, this remains a bull tape until proven otherwise. On the upside, keep an eye on 4575-77, 4580-82, 4598-4600 and 4609.
On the downside, my levels are: 4557-62 (big support the last few days), 4545, and 4530-33.
MiM and Daily Recap
The ES traded down to 4561.75 on Globex and rallied up to 4590 at 9:16 am and traded 4582.50 on FRYdays 9:30 ET futures open. After the open, the ES rallied up to 4588.50 at 9:32, dropped down to 4576, rallied back above the VWAP to a 4582.75 ‘double top’ and then stutter-stepped down to new lows at 4564 at 10:04. After the low, the ES rallied to a lower high at 4578, then sold off down to a higher low at 4546.75 at 10:30, rallied back up to the 4582.75 double top and then dropped another higher low at 4568.25 at 12:52. From there, it rallied up to the 4584 level and sold back off under the VWAP to the 4573 level at 2:37 and rallied back up to 4580.
After the rally, the ES dropped down to a new low at the 4565.25 level at 3:16, rallied up to 4571.50, slipped down to a another new low at 4564.25 at 3:44 and traded 4566.50 as the 3:50 cash imbalance showed $412 million to sell and traded 4563.75 on the 4:00 cash close. After 4:00, the ES traded in a narrow range and then sold off down to another low at 4562.25 before settling at 4564, down 1.5 points or -0.03% on the day.
In the end, the ES was dominated by the Nasdaq reweighting — everytime the ES would go bid the NQ would sell off. In terms of the ES’s overall tone, it was trying to hold but the sell programs in tech were too big. In terms of the day’s overall trade, 192k ES traded on Globex and 1.173 million traded on the day session for a grand total of 1.371 million contracts traded.
The Dow closed higher for the 10th day in a row, its longest winning streak in six years and a good example of stock buyers that are moving into different sectors such as the banks, health care, energy and the airlines. Rotation is underway, but how long will it last?
Technical Edge
Technical Edge
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NYSE Breadth: 51% Upside Volume
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Advance/Decline: 48% Advance
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VIX: ~$14.25
No dice on our V setup, although I am still keeping an eye on ARKK this week with tech in the earnings spotlight.
SPY
The $454s held as resistance on Friday, as the SPY was unable to break through this area. Now turning the page to Monday, we have a little strength in pre-market trading. Will it turn into enough to break through $454?
SPY 30 min
Let’s see if the SPY can push through the $454 to $454.50 area. That would put $455.35 in play, then $436+
On the downside, a break of the Friday’s low at $452.17 could put a test of the 10-day moving average in play near $450:
SPY Daily
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Upside Levels: $454 to $454.50, $455.35, 456.50, $459
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Downside Levels: $451.50 to $452, ~$450 + 10-day ema
S&P 500 — ES Futures
30-min chart shows how the ES has been making lower highs since Wednesday. Can it snap that streak today?
It will need to clear the 4577 area to do so, putting 4580-83 resistance in play, then 4590, 4598-4600, then the highs up at 4609.
On the downside, 4557-62 has been three-day support. A break of that area could usher in a test of the 10-day ema, currently down at ~4545.
30-min ES
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Pivot: 4577
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Upside Levels: 4580-82, 4590, 4598-4600, 4610
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Downside levels: 4557-62, 4545/10-day ema, 4530-33
SPX
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Upside Levels: 4555, 4567.50, 4578-80, 4595-4600
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Downside Levels: 4536, 4527.50, 4505-10
NQ
NQ Daily
We focused on the S&P late last week, but let’s get back to the NQ here, which has been the leader. 15,420-440 has been support the last few days.
If we lose that, I want to see how the NQ handles the 15,300 to 15,340 area. That’s the 61.8% retrace, 21-day moving average and perhaps most importantly, the retest of the breakout area.
If today, we would be in the red for four straight days, potentially setting up a nice bounce.
QQQ
QQQ Daily
It would take about a 1% flush to get the Qs into the 21-day moving average and the breakout level near $371.75.
It could find buyers a little earlier (for instance, the gap-fill at $374.19), but I’d love to see $370-72 dip as a potential buying opportunity.
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Upside levels: $380, $381.50, $383
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Downside levels: $375, $372.80 (61.8%), $370-72
ARKK
ARKK Daily
*Daily-up over $48.62 could reinvigorate our longs.
I am looking for a retest of the Q1 and Q2 highs near $45.50, along with the 21-day sma.
If it fails, we’ll know in a hurry. Can use a tight stop in that case and can always re-engage if knocked out. Size accordingly.
KRE
KRE Daily
Setup is from Sunday evening, but worth pointing out again. A retest of the ~$45 level would get us long, as it’s a retest of last month’s high, as well as the Q2 high, and the 10-day ema.
Open Positions
Bold are the trades with recent updates.
Italics show means the trade is closed.
Any positions that get down to ¼ or less (AKA runners) are removed from the list below and left up to you to manage. My only suggestion would be break-even (B/E) or better stops.
** = previously mentioned trade setup we are stalking.
Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B. Now Add META, AVGO, UBER, CRM, AMZN, CVS, AMD and TLT.
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DOCN — Long from $38.25 — Small trim at $39.75 to $40 and a second trim above $40.75. Trimmed more between $45 and $47 and down to ⅓ at $49.50+
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Should have us down to a ⅓ position. I think we may be able to get $53+ out of this.
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JPM — Retested the breakout zone and long. This is a longer term swing. Many are long from $143-145. Still carrying ¾ to ⅔ of position against a break-even stop-loss.
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Down to ½ if we see $157 to $157.50+ (or anything above Thursday’s high if playing more conservative)
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ARKK — Long from ~$46 — trimmed near/at $50. Still carrying ⅔ to ¾ of position. Trim at ~$52
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HSY — Longer-term swing. Want to see this one hold $236-37. “Minor” ~⅕ trim at $237.50 to $239.
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DAL — long from $47.20 (daily-up) and trimmed at $48. Trimmed down to ½ at ~$48.50. $49 is technically the next trim spot, but aggressive bulls can just go for the post-earnings highs near $49.80.
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Break-even stop
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**SBUX — Either long from ~$101.42 or waiting for $102.50+ (the monthly-up rotation). If long currently, $99 to $99.50 looks like a low-risk way to proceed and $103 seems like a reasonable ¼ trim for those already long.
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$103+ trimmed for those long from $101.42-ish.
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DIA — long from ~$346.75. ¼ trim near $350, down to ⅓ at $351.50. Notice the rejection from the 78.6% retrace (of the bear market range).
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B/E stop from here. I’m okay with getting down to a 40% to 50% position if we see $354-55+ today
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YM — long from ~34,900 and ⅓ trim at 35,225 (+325). Second trim at 35,417+ (+517) and finally, small trim at 35,500 (+600)
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Can trim down to ¼ to ⅓ position if we see 35,500+
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While I do think the YM can keep going, it’s on a 9-day win streak, so better to be prudent and take the gains, then look to re-establish a long, IMO.
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WMT — went weekly-up from this week’s play — Trimmed above $157.55 and then $158. Probably has many down to ½ or ⅔ of position as we’re still fishin for $160+
Go-To Watchlist
Feel free to build your own trades off these relative strength leaders
Relative strength leaders →
(Lack of updates here but these names remain my top focus list!)
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Growth stocks ARKK — DKNG, DOCN, UPST, SHOP
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LLY, CAH
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AI stocks — NVDA, AMD, AVGO, ADBE, SMCI
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Mega cap tech — MSFT, AAPL, META, CRM
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Select retail — CMG, ELF, LULU, COST
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Homebuilders ITB — TOL, KBH, DHI
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BRK.B
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ABEV, DXCM
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Cruise stocks — RCL, CCL, NCLH
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DAL, DT, AMAT
Relative weakness leaders →
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DIS → recent 52-week lows
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CF, MOS
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PFE (all vaccine gains now gone)
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EL, FL, DG
Economic Calendar
Disclaimer: Charts and analysis 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!
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