End-of-Month Walk Away?
August was a tough month for the ES.
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Our View
No matter what anyone says…trading the S&P and Nasdaq futures is not easy.
To do it right, you have to have a plan and extreme patience, but that is not easy to do. With so many things going on at once, we never know where the next tape-bomb will come from.
Yesterday after the ES made its high at 4530, it dropped 29 points. At first, I thought I missed a headline or some news, but when I asked the MrTopStep chat, @RealTraderDave said there was no news.
It’s those types of moves that change the tone and throw people off their game plan, but as I continue to say, with ~96% of the NYSE volume coming from algorithmic and high-frequency trading programs, this type of stuff should not surprise anyone.
After all, these are not our father’s markets or charts, and nor will they be!
Our Lean
Today the Atlanta Fed President Raphael Bostic speaks in South Africa. We’ve also got data for Jobless Claims, Personal Income and Spending, the PCE Index at 8:30 ET — one of the Fed’s favorite inflation gauges — and the Chicago Business Barometer at 9:45.
According to the Stock Trader’s Almanac, it’s not uncommon for the stock market to face weakness leading up to the long Labor Day weekend. For Thursday, the S&P has rallied just 57% of the time over the 20 years. On Friday, the odds drift even lower, down to 52% over the last 20 years.
The Nasdaq has identical readings, while the Russell and Dow are even weaker on Friday, up just 47.6% of the time over the last two decades.
Our Lean: I have no idea how any of today’s economic numbers will affect the direction of the ES — there are too many to try and speculate on — but ultimately I think it goes higher and we see a test of the 4550 area.
Should the ES “hold the rally,” then I expect a firm close. That said, traders need to be on the lookout for a potential “end of month walk away” late in the day.
Note: Here is a link to the CME Group’s Labor Day holiday schedule.
MiM and Daily Recap
ES 15 min
The ES traded up to 4516.25 and sold off to 4496.25 on Globex and opened Wednesday’s regular session at 4409.25. After the open, the ES traded up to 4530 at 10:15 and then sold off 29 points down to 4501 at 10:28. After the low, the ES traded back up to 4515.50, back-and-filled from the 4509 level to the 4515.50 level, traded up to the 4520.50 at 11:01, back-and-filled again and traded up to 4525.50 at 11:49, and then stutter-stepped up to 4530.75 at 12:47. After the high, the ES traded below the VWAP down to 4514.75, chopped in a narrow range just above and below the VWAP, made a low at 4513.75 at 2:27. That’s when I said:
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IMPRO: Dboy:(2:34:22 PM): Can’t even get down to 4500
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IMPRO: Dboy :(2:45:58 PM) : That was the dip
After the posts, the ES rallied back up to a lower high at 4528 at 3:10 and pulled back to the 4521 area at 3:36 as the early imbalance showed $132 million to sell. The ES traded 4521.75 as the final 3:50 cash imbalance showed $1.695 billion to sell, sold off down, and traded 4524 on the 4:00 cash close. After 4:00, the ES traded up to 45xx and settled at 4527.50 on the 5:00 futures close, up 17.50 points or 0.39% on the day.
In the end, it was a choppy but upside-biased day. In terms of the ES and NQ’s overall tone, they both acted and closed firm. In terms of the ES’s overall trade, volume was steady: 255k traded on Globex and 1.099 million traded on the day session for a total of 1.358 million contracts traded.
When you wonder about the low volume, this story isn’t helping. According to research firm ETFGI, this year has seen 929 global exchange-traded funds close, up from 373 at the same point last year. Many niche products in the industry are struggling to attract investors in a market where a few big tech stocks reign. The closures also reflect weaker inflows and competition from big asset managers, which has driven down fees. I talked a lot about this during and after the COVID19 pandemic — that many ETFs and stocks would not make it and I think this is especially true when you look at the NYSE volume.
Technical Edge
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NYSE Breadth: 57% Upside Volume
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Nasdaq Breadth: 56% Upside Volume
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Advance/Decline: 61% Advance
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VIX: ~$13.75
S&P 500 — ES Futures
ES Daily
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Upside Levels: ~4550, 4570-74
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Downside levels: 4523, 4510, 4495-4500, 4473
NQ
NQ Daily
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Upside Levels: 15,550, 15,610, 15,650, 15,750
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Downside levels: 15,400-425, 15,300-330, 15,240
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, TLT and YM.
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JPM — Many are long from $143-145. This is a longer term swing. Trimmed $153s, then $157.50+ on 7/24.
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Down to ½ position vs. Break-even stop. Can make small, ~10% position trim if we see $160+
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If worried about a larger correction, can sell/trim north of $150 and look to re-establish lower (if we get it).
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XOM — Long from the monthly-up area at $108.50 — First ¼ or ⅓ trim is ~$112.50. Stops at $104.
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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