Leaning Bullish as the S&P Range Gets Tighter and Tighter

We’re looking for the Thursday/Friday low. Here’s why.

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Our View

I got a little too bullish into the rally Wednesday, but I stuck to buying the weakness. Maybe I’m wrong but I still think it’s a buy-the-dips kinda market and still think the ES has a good chance of getting above and running the buy stops above 4168.

I want to say this again: That doesn’t mean I’m bullish, I’m just following the price action. Trade what’s in front of you, what your charts say or what your system shows. It’s okay to have theories and opinions, but don’t let all the macro-analysis creep into your positioning.

If the charts are bullish, you buy the dips. Regardless of what the 2/10-year spread is or where interest rates are. At some point, buying the dips will fail. But it would be wrong to say the first one-third of the year hasn’t favored the longs.

Our Lean

Today’s question of the day? Is yesterday’s 4121.50 low good enough to set up a push higher today?

Yesterday I wrote about my days on the trading floors, but today we are keeping things short and sweet. As I already said, I am looking at today from the long side. Specifically, I am looking for one of the PitBull’s trading rules.

That rule is the Thursday/Friday low the week before the monthly options expiration (which is next week). On the upside, the ES needs to clear and the 4175 area, opening the door up to ~4200.

MiM and Daily Recap

The ES traded up to 4168.50 and sold off down to 4136.50 on Globex, then opened Thursday’s regular session at 4141.50. After the open, the ES traded 4143 and then sold off down to 4128.25 at 9:36 and chopped in a 7-point range for the next hour until it popped up 4142 at 11:47. Then it back-and-filled just above and below the VWAP at 4138.75 for the next 35 minutes when the ES ran up to a new high a 4144.50, pulled back to 4134.25, up-ticked to 4140.75 and then sold off down to a higher low at 4124.50.

From there, it rallied back up to the VWAP at 4138.25 at 2:32, shot up to 4146.75 at 2:43 and pulled back to 4139. level at 3:22 as the early imbalance showed $351 million to sell. The ES traded 4141.50 — the same level it opened at 9:30 — as the 3:50 cash imbalance showed $506 million to sell, traded down to 4138 and traded 4144 on the 4:00 cash close. After 4:00, the ES edged slightly higher and traded up to 4145.75 on the 5:00 futures close, down 6.75 points or 0.16% on the day.

In the end, the ES pulled back but never retested Wednesday’s 4112.25 low and closed down modestly. In terms of the ES’s overall tone, it acted firm late in the day. In terms of the ES’s overall trade, volume was steady at 1.43 million contracts traded.

Technical Edge

Inside day yesterday for the S&P, as indecision continues. For now, the KRE seems to have a high correlation with the index. If it’s under pressure, it will be hard for the index to rally and it will need mega-cap tech to play ball.

Remember, mega-cap tech has driven a bulk of the S&P gains this year, so it can’t withstand two big negatives (that being selling pressure in tech and KRE).

That said, the KRE is down in 8 of the last 9 days. If it fetches a bid today and tech continues to hold up or trade higher, the S&P has a path for higher prices.

S&P 500 — ES

Notice how tight this range has been, not just in the last 4-5 days, but the last 6 weeks. The upside has been capped by ~4175. The downside limited to ~4115. We need a break of this area to push the outer edges of the range.

SPY

Daily-up over ~$412.50 without reversing down could put the current resistance zone in play (first level below under Upside Levels). Daily-down below ~$410 without reversing back up could put the $407 to $408 zone in play.

SPX

QQQ

Tech has been a leader this week. The price action has been subtle but constructive. The QQQ got above $321, then stayed above it. Then it rotated over $323.50 and got our first target of $326+

Now let’s see if that $328-$331 zone is doable.

NQ

We need to stay above 13,300 to keep our trade intact. It hit our 13,450-70 target and came within 5 points of the 13,500 target. Great action in the NQ considering the price action in the ES.

I’m very interested in seeing how it handles a dip back down to the 13,300 area, which is the rising 10-day ema and the prior resistance level.

DXY

Less a trade, more an observation as the USD gains some steam. Watch last week’s high and the declining 50-day moving average in the DXY.

If this holds as resistance, $101.50 could be back in play on the downside.

However, a breakout could put $103.35 to $104 in play and would be a negative for equities.

Uber

I’m keeping an eye on Uber. Huge volume spike off earnings and now looking a bit tired. If we can get a dip to the prior breakout level of $37 to $37.50 and a tag of the 10-day, it may be worth a shot on the long side.

If this zone is tested and holds, $35.50 is a decent risk area we want to see hold. Ideally though, I prefer calls so I can limit my risk to “price paid” (aka I can just limit my risk to the net debit) and look for a bounce. $38 to $39 is an ideal first target.

Open Positions

Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B

Go-To Watchlist

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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!