Fry-Day Options Expiration, July Jobs Report on Tap

The market is digesting AAPL and AMZN earnings, too.

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Our View

We’ve got Apple and Amazon’s earnings out of the way, but it’s a bit of a mixed bag. Apple was slightly lower after its print, while Amazon is catching a nice pop. Earnings across the board remain mixed, but that discussion will be on the back burner Friday morning as the July jobs report is on tap.

With the jobs report on deck and the weekly options expiration here, could we be setting up for some sort of rally?

Down three days in a row on the S&P and with buyers showing their willingness to step in at key points yesterday has me thinking that perhaps we could see a bounce. Is the overall decline over? Well that’s too early to say.

As I spelled out in the Lean earlier this week, I think we could have an intermediate-term decline. That’s as we take stock of all the mixed earnings reactions and pair it with the rising 10-year yield (which hit a new 2023 high yesterday) and the seasonal weakness we tend to get from August and September.

We have been talking about the pain in the bond market for a little while and now we see that Bill Ackman is betting against long-term bonds. Bonds may be short-term oversold, but could still have further to fall — particularly if yields keep rising.

Our Lean

While we could still be setting up for a period of consolidation, doesn’t mean it will be a straight-down development. The ES has suffered a three-day peak-to-trough decline of 116 points or 2.5%.

Can we go down further? Of course we can. And if we do, I will be looking at the 4493 to 4503 area as a notable support zone. So far on the upside, 4545-50 was resistance yesterday and during Globex.

For now, that’s our situation…basically a 50-point trading range and we’ll have to see which one breaks first.

Our Lean: I am leaning long, but I don’t like chasing. If we gap-up, I would look to buy the pullback and see if we can push into the resistance levels above. On the downside, keep a close eye on the 4515 area, then the 4493 to 4503 zone.

MiM and Daily Recap

The ES traded up to 4547.50 on Globex and opened Friday’s regular-hours session at 4513.25. The ES spent the first 30 minutes of the session trying to grind higher, climbing to 4526 — less than two points from Wednesday’s regular-session low — then rolled over, falling by 20 points down to 4505.75, marking the session low at 10:30. From there, the ES powered higher, climbing 25.50 handles to 4531.25 at 11:50. After some back-and-fill, the ES rallied up to 4540 at 12:50, stutter-stepped, then made a new session high by two ticks at 4540.50 at 1:25. That marked the session high.

From there, the ES pulled back about 16 points, trading 4524.75 at 2:00, traded up to 4533 at 2:20, traded back down to 4525 at 2:35 and traded back up to 4533.50 at 2:50. The ES pulled back to 4520 at 3:15 and traded 4522 as the 3:50 cash imbalance showed about $500 million to buy. THe ES traded up to 4528.75 and traded 4520.25 at 4:00. After 4:00, the ES shot up to 4536.75 after AMZN’s results, then fell back down to 4520.75 on AAPL’s results, before settling at 4524.75 at the 5:00 futures close, down 15.50 points or 0.34%.

In the end, the ES ended lower for the third straight day, but the sellers were looking tired and it was more of a two-way battle. In terms of the ES’s overall tone, the sellers won on the daily timeframe but the buyers stepped in when they needed to. In terms of the ES’s overall trade, volume was on the higher side at 1.7 million contracts traded.

Technical Edge

SPY

On the downside, bulls need to defend yesterday’s low at $447.37. On the upside, they want to take out yesterday’s high at $450.79, then ideally run the SPY up to the $451.50 level.

If the SPY can’t hold yesterday’s low, it could set up for some weakness down into the mid-$440s, as shown on the daily chart below:

SPX

S&P 500 — ES Futures

Below is the 1-hour chart, then the daily chart to zoom out and give a bit more perspective.

The 1-hour chart shows how the 4545 area has been resistance over the last two days, but how that zone sits just below the more vital area between 4550 and 4560.

If the ES can power through these areas, it will be an impressive feat (especially once we look at the daily). If it can do so, it puts 4570+ in play.

On the downside, bulls would love to hold the 4515 to 4521 area. If they can’t, yesterday’s low could be on the table.

As we look at the daily chart, look at where resistance is coming into play and where support could come into play if we break yesterday’s low:

NQ

Bulls would love to break the NQ up over 15,562, potentially opening the door to 15,625, then ~15,700. Unless Apple plays ball though, that may be difficult today.

(If you look closely, look at that strong wick action from yesterday at the 200-unit moving average, prior breakout level and uptrend support (blue line)).

TLT

The $95s held yesterday. If we can get a daily-up rotation over $95.32, maybe the TLT can make up some of these losses and put together a short-term bounce. If yields continue higher though, the TLT will see more pressure.

XOM

Still watching that monthly-up over $108.50. Note the 200-day moving average just above.

ARKK

Looking to re-engage ARKK if we get a dip into the $44.50 to $45.50 area. That’s a retest of the Q1 and Q2 highs, as well as the 10-week and 50-day moving averages.

~$47.50 would be the first trim spot. $42.50 is a wide stop, but perhaps the best one to use for traders who size small. For “right or right out” traders, $43.50 to $44 could be used as a stop.

Open Positions

Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B. Now Add META, AVGO, UBER, CRM, AMZN, CVS, AMD, TLT and YM.

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!)

Relative weakness leaders →

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!