Like a Tractor in a Rainstorm, the S&P Is Stuck in the Mud
That said, there’s a way to approach the tape.
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The bulls are making a case for the upside consisting of two main catalysts: No more rate hikes and the passage of the US budget. That’s even as the S&P is up 9.2% YTD and NASDAQ is up a whopping 21.5%.
The PitBull said the rally is only composed of a handful of stocks and talked about how the Nikkei has never traded back to its August 1990 high. He talked about Japan’s ‘Nifty Fifty’ and that there were only a handful of companies surviving, then went on to talk about stagflation and said none of the major problems will matter until they do.
Personally, I think the S&P is stuck; it’s not going to go up or down sharply. Kind of like a farm tractor stuck in the middle of a corn field in a torrential downpour, it can’t back up much and it won’t go forward much either.
I still think as the week wears on, so will the ES and NQ. Right now every pullback is being bought, but I think the odds of a pullback will increase later in the week.
For now, if the ES gaps higher, my lean would be to sell the open. If the ES gaps lower, I would look to buy it, but my guess is you sell the early rallies.
If the ES starts breaking below 4200, I would set my sights on the 4165-4175 zone, 4154-ish and then 4130-4140. On the upside, 4225-30 has been resistance. Above it puts 4242-4250 in play.
The action should pick up a little today, but we should see another day of narrow chop.
MiM and Daily Recap
The ES traded down to 4186.50 on Globex, rallied up to 4210.50 at 8:31 and opened Monday’s regular session at 4204.50. After the open, the ES ripped up to 4121.75 at 9:40 and then sold off down to 4191 at 10:09 after a headline hit saying there was an explosion near the Pentagon and then rallied back up to 4212.75 at 11:32. With the exception of one blip down to 4198 at 10:58, the ES traded in a 5 to 7 point range until it traded down to 4200.25 at 1:16 and then back up to 4212.75 at 1:51.
The ES traded down to 4203.75 at 3:45 as the early imbalance showed $207 million for sale. The ES traded 4204 as the 3:50 cash imbalance showed $175 million for sale 4205.75 at 4:00 and settled at 4207.75 on the 5:00 futures close, up ever-so-slightly on the day.
In the end the bulls won, but it was a grinder. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was on the low side at 1.26 million contracts traded.
NYSE Breadth: 66% Upside Volume
Advance/Decline: 60% Advance
**There are a andful of individual stock trades coming at 9:00 a.m. ET**
Correction: Yesterday I said 10-year yields were near 10-year highs. After a second cup of coffee, I saw the error and meant to say 10-year yields were at 10-week highs — (and are now higher today).
S&P 500 — ES
Upside Levels: 4220, 4242-45
Downside levels: 4186-4190, ~4175, 4150-55
Upside Levels: $421.22 (gap fill), $425-26
Downside Levels: $417.35, $415
Upside Levels: 4195-4200, 4220, 4245
Downside Levels: 4180 (two-day low), 4170-ish, 4150-55
The halfback of last week’s range is ~13,650. I’d like to see how a test of the 10-day ema holds up. Ideally, we’d actually get a retest of the 13,300 area, but that will take more than a day (most likely!)
For now, see how the 10-day handles.
For the Qs, that’s roughly $330.
Down 7 days in a row and now below the 78.6% retracement, the TLT is under pressure. Aggressive buyers may consider stepping in here around $100 — as it trades $100.3X around 8:30 a.m. ET.
There’s a big gap-fill level down around $99.65 from early March. Not to mention, the $99s have been solid support for about six months now.
I’d be willing to take a shot on TLT down there, knowing that a close below $99 could get me out.
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 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 and UBER.
CRM — Took time, but got our $207-$208 trim down, now down to about a 40% position after $212.50 touch. Probably down to ¼ position if we see $215-ish now, but want runners for potential push to $220.
Raise stops to Break-even.
UBER — long from $37.50 or just below — First trim $38.50-ish, second trim down to ½ position at $39 to $39.25. Man, what a nice exit in Uber, with yesterday’s tag of 40.50 and a sharp reversal lower. Kudos longs!
Ideally we want $40 to $40.40 to get down to runners or out exit. Breakeven stops.
*Feel free to build your own trades off these relative strength leaders*
Relative strength leaders →
MCD, PEP & KO, WMT, PG — XLP
NVDA, CRM, AMD
MSFT, AAPL, META
Relative weakness leaders →
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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