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Our View

I got long on Globex Monday night at 4408 and put in a 4442.50 offer as the futures were trading 4439 to 4440. This rally was sold before and after the opening.

I totally mismanaged the trade because I like selling gap-up opens and had I gotten out, I would have sold the gap-up but I didn’t do that. One of my favorite trades is fading the gaps, but I was too preoccupied with the idea that ES was going up.

That said, I did end up profiting…letting a 32-point trade slip by was not what I wanted to see. I always screw up when I let my position dictate my thought process. I was long and so my head was thinking bullish instead of selling the gap-up like I should have.

MiM and Daily Recap

The ES traded up to 4440 and opened Tuesday’s regular session at 4431. After the open, the ES sold off down to 4418.25 at 10:00, rallied just above the VWAP at 4422.50 and then dropped down to 4405, just above the 4402.50 Globex low. From there, it back-and-filled for the next 10 minutes, rallied up to 4417.50 at 11:02 and then traded back down to 4407.50 at 11:17 and did another round of back and fill.

The ES sold off down to 4394.75 at 1:16 and for the next 55 minutes chopped a 4 to 6 point range until it popped up to 4413.50 at 3:15. Yes, there was some chop in between that I didn’t include, but I am writing about the larger moves, not the 3 to 6 point moves. After the pop, the ES sold back down to 4394.25 at 3:48 and traded 4397 as the 3:50 cash imbalance showed $1.1 billion to sell, traded up to 4402.25, and traded 4399.75 on the 4:00 cash close. After 4:00, the ES traded in a 2 to 3 point range and settled at 4400.25 on the 5:00 futures close, down 9.25 points or 0.28% on the day.

In the end, it was a sell-the-higher-open day. In terms of the ES and NQ’s overall tone, they acted weak. In terms of the ES’s overall trade, volume was in-line with what we have been seeing: 205k contracts traded on Globex and 1.118 million traded on the day session for a total of 1.325 million contracts traded.

Technical Edge

I’m glad that we used Tuesday’s gap-up open to take some profits in our QQQ and CRM call positions.

This week’s QQQ $360 calls went from the $2.50 to $3.00 range on Friday to opening at $8.00 on Tuesday. The CRM September $210 calls have gone from sub-$6.00 to $9.00+ (and that’s being generous).

I’m not highlighting these to be a blowhard; I’m noting these because it highlights a key theme in trading: Picking your spots and being patient.

We had a pretty robust three- to four-month window for trading, but have toned down our trades significantly this month given where the markets were and the typical seasonal weakness we tend to see in August and September.

That said, we waited patiently for the CRM and QQQ setups to come to fruition, then pounced when we felt the odds favored us. Using options helped navigate the risk well, too.

SPY

From a bull’s perspective, Tuesday’s action was exactly what they should have feared: A rally to the 50% retracement of last week’s range and the 10-day/10-week moving average area, followed by a harsh rejection of the gap-up.

As of 8:00 a.m. ET, we have a mild pre-market gain in the SPY. So keep an eye on yesterday’s low at $437.57 (if that number sounds familiar to you, it’s because it was Friday’s high and on Monday, we considered it a key pivot level).

A break of $437.57 to the downside and failure to regain this area could put the $435 level in play — which is the 78.6% retrace of the current rally and this week’s low.

Guest Post

Topic: PTG 3 Day Taylor Cycle

Author: David D Dube’ (a.k.a. PTGDavid)

Website: https://polaristradinggroup.com/

Prior Session was Cycle Day 1 (CD1): Gap opening propelled price up to our stated 4440 target but buyers could not sustain the bid, thus reversing back down fulfilling lower target zone (4405 – 4400) stated in DTS Briefing 8.22.23. Prior range was 45 handles on 1.323M contracts exchanged.

…Transition from Cycle Day 1 to Cycle Day 2

This leads us into Cycle Day 2 (CD2): Price is back to the middle of the 5-day Value Area and now in a more neutral location. Larger context daily downtrend remains the dominant driver until 4450 at minimum can be converted to upper support. Expectation for Cycle Day 2 is for continued balancing activity within the multi-day value zone. As such, scenarios to consider for today’s trading.

Bull Scenario: Price sustains a bid above 4400, initially targets 4420 – 4425 zone.

Bear Scenario: Price sustains an offer below 4400, initially targets 4380 – 4375 zone.

PVA High Edge = 4415 PVA Low Edge = 4396 Prior POC = 4400

*****The 3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.

For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:

Link to access full Cycle Spreadsheet > > Cycle Day 2 (CD2)

Thanks for reading,

PTGDavid

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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!