Earnings Resume as S&P Snugs Up to Resistance

by Danny Riley
on July 18, 2023

Let’s look at the Russell and Dow today, too.  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Earnings Resume as S&P Snugs Up to Resistance

Let’s look at the Russell and Dow today, too.

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Our View

It didn’t take me long to see that I was wrong in the Lean — (how many Furus will say that?)

The first part was the ES was down for most of the Globex session, but the real deal was the lack of volume, which was the lowest I remember seeing since the Christmas holidays, although mid-May had two sessions in there that were about in-line with Monday’s volume.

For the whole day, only 1.009 million futures traded. That’s summer trading with a light calendar for you. This made it easy for the buyers to push the markets higher.

I am not going to make this long — thin to win may prevail this week, but earnings will drive the narrative. Will we get another sell-the-news reaction to banks, which traded pretty well on Monday?

Our Lean

More and more I have tuned out from reading anything or listening to CNBC. It’s just noise. Let’s face it: Anyone (including me earlier this year) has been wrong to get bearish while the S&P and Nasdaq are in an uptrend.

Just yesterday, Jefferies came out with a note talking about “dark clouds on the horizon.” Well maybe there are, but it doesn’t matter because theories don’t pay the bills or grow the accounts — price pays and grows the account.

One of the things I am big on is when the ES closes weak, it usually sells off a little on Globex and then rallies. This is 100% part of the current buy-the-dip price action.

While I still think it’s a buy-the-dip trade, that could change later in the week with so many earnings on tap. As for levels, keep a focus on 4551 and 4571 on the upside. On the downside, I have 4525-28, 4510, and the big 4485-4495 zone on watch.

According to Jeff Hirsch from the Stock Trader’s Almanac: “NASDAQ Down 5 Straight During July Monthly Options Expiration Week.” (Data table available in the link).

He adds that the “NASDAQ’s record is even weaker [than the Dow’s down 23 of the last 41], down 25 of 41 years with an average loss of 0.38%.”

MiM and Daily Recap

The ES traded down to 4526.75 on Globex and opened Monday’s regular session at 4536.75. After the open, the ES shot up to 4543.75 at 9:33, pulled back to the VWAP at 4536.75 and slowly rallied up to 4546.75 at 10:10. From there, it back-and-filled in a 5-point range until 11:24 when the futures rallied up to 4553.50 at 12:08. That’s when I posted this in the MTS chat:

  • Dboy :(12:00:25 PM) : I feel like shorting

  • Dboy :(12:00:43 PM) : 4553-56 es 10 pt stp

The ES sold off down to 4546.25 and the NQ sold off from its 15,811 high down to 15,670.25 at 12:37.

After the high, the ES got hit by a wave of buy programs that pushed the ES up to four separate new highs: 4547.50 at 10:50, 4553.25 at 11:53, 4553.50 at 12:08 and then up to 4557.25 at 2:26. After a 5-point pullback, the ES rallied up to a new high at 4557.25 at 2:36, had another 5-point pullback and then hit several big buy stops that pushed the ES all the way up to 4565.75 at 3:21. Then I posted:

  • Dboy :(3:27:13 PM) : that blast up to 4565.75 seems like it shot its wad for now

  • Dboy :(3:28:37 PM) : lots of nq sells

  • Dboy :(3:45:17 PM) : someone selling

The ES pulled back down to the 4559.25 level and then traded back up to 4563 at 3:41 and then pulled back to 4554.25. The ES traded 4558.75 as the 3:50 cash imbalance flipped to $1.025 billion to sell, traded down to 4551.50 and traded 4554.50 on the 4:00 cash close. After 4:00 the ES dipped lower and settled at 4550.00 on the 5:00 futures close, up 17 points or 0.37% on the day.

In the end, all the selling dried up right after the open. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was low, only 154k traded on Globex and 855k traded on the day session for a total of 1.009 million contracts traded.

Technical Edge

  • NYSE Breadth: 54% Upside Volume

  • Advance/Decline: 54% Advance

  • VIX: ~$13.50

What was Monday? A summer doldrum day with no events on the calendar. It showed in the volume, too.

Now more bank earnings are on deck with BAC, MS and PNC, while TSLA and NFLX kick off tech tomorrow.

SPY

Continues to stall around the $451.75 mark. Bearish scalpers have cleaned up at this level in back-to-back days now. We are definitely not saying the S&P will surely pull back — not at all — but a dip-buy is simply our top setup in the S&P at the moment.

  • Upside Levels: $450, $451.75

  • Downside Levels: $449, $447.50, $446, $444

S&P 500 — ES Futures

  • Upside Levels: 4551, 4560, 4571.25

  • Downside levels: 4525-28, 4510, 4485-4495

SPX

  • Upside Levels: 4533-35, 4550

  • Downside Levels: 4500-05, 4472, 4450-55

NQ + QQQ

*Same levels/setup as Monday.

  • Upside Levels: 15,730, 15,855

  • Downside Levels: 15,700, 15,555, 15,440-60

QQQ

  • Upside Levels: $380, $382.50 to $383

  • Downside Levels: $375.50, $371-73

DIA & YM

Daily — DIA

The DIA ETF is trying to rotate over a couple of quarters worth of highs. Over the Q2 high and we could see a move to the 78.6% retrace, then potentially much higher.

Remember, the Dow has been a dog this year — up just 4.4% in 2023 — but it’s held up the best amid the bear-market selloff. Ironic, right? A close over Monday’s high could keep the bull party going.

Here’s the Futures setup on the quarterly chart, if that’s an easier visual for you futures traders:

YM Futures — Quarterly

IWM

Potential resistance looming ahead, but like the Dow, a move over $200 could get the catch-up trade going.

That’s as the IWM perfectly held the ~$180 area. Nice trade there if you caught it.

IWM — Daily

TNX

TNX Daily

Lastly, just look at the chart above for yields (or TNX), which is back into its downward channel.

Keep it simple: Up over 3.86 gets it back above the Q2 high and all of its key moving averages. A dip down to 3.70 needs to hold as support, or lower yields are on tap.

Lower yields = bullish for stocks and bonds, generally speaking, and vice versa.

 

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 and AMD.

  1. 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+

    1. Should have us down to a ⅓ position. We’re +28% from entry. Good job!

  2. JPM — Retested the breakout zone and long. This is a longer term swing, but can consider trimming.

    1. Many are long from $143-145. Traded $153+ Monday. Still carrying ¾ to ⅔ of position against a break-even stop-loss.

      1. Down to ½ if we see $157 to $157.50+

  3. TLT — gap-filled at $99.65 — got our first trim at 100.75+ and second trim between $101.50 and $102.

    1. Beautiful! ⅓ to ½ position now vs. a Break-even stop. Can consider exiting more here just to pay ourselves for the risk taken. Otherwise, look for $102.70 to $103 to get down to runners.

  4. ARKK — Long from ~$46 — trimmed near/at $50. Still carrying ⅔ to ¾ of position.

    1. Ultimately, this will be a dip-buying name.

  5. HSY — Longer-term swing.

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!)

  1. Growth stocks ARKK — DKNG, DOCN, UPST, SHOP

  2. LLY, CAH

  3. AI stocks — NVDA, AMD, AVGO, ADBE, SMCI

  4. Mega cap tech — MSFT, AAPL, META, CRM

  5. Select retail — CMG, ELF, LULU, COST

  6. Homebuilders ITB — TOL, KBH, DHI

  7. BRK.B

  8. ABEV, DXCM

  9. Cruise stocks — RCL, CCL, NCLH

  10. DAL, DT, AMAT

Relative weakness leaders →

  1. DIS → new 52-week lows

  2. CF, MOS

  3. PFE (all vaccine gains now gone)

  4. 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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