Tuesday’s Session was Cycle Day 1 (CD1): This day unfolded as a “Normal CD1” with price fulfilling downside range objective 4208 – 4204 zone. The ensuing rally tagged upper TTT Level at 4235 before settling back within mid-value. Range was 31 handles on 1.207M contracts exchanged.
…Transition from Cycle Day 1 to Cycle Day 2
This leads us into Cycle Day 2 (CD2): Part of this cycle’s rally is in-place, so expectation is for some continued back n fill consolidation with a long-bias for dip buyers. As such, estimated scenarios to consider for today’s trading.
1.) Price sustains a bid above 4227, initially targets 4235 – 4236 zone. Breakout above PH (4236.75) opens the skylight objective to 4248 handle.
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Chart of the Day
Stalled Rates Leave U.S. Financial Stocks Out on a Limb
U.S. financial stocks lost “a strong tailwind” from rising interest rates, according to David Kastner, a senior investment strategist at the Schwab Center for Financial Research. Kastner compared the industry group’s relative strength within the S&P 500 Index and the yield on 10-year Treasury notes in a report Sunday. The ratio between the S&P 500 Financial Index and the U.S. equity benchmark climbed as much as 9% through last week from an April 20 low, according to data compiled by Bloomberg, while the 10-year yield was little changed. Kastner cut his rating on financials to marketperform from outperform.
S&P/Nasdaq ; Wash, Rinse, Repeat
The S&P (ESM21:CME) and Nasdaq (NQM21:CME) futures repeated Monday’s price action by rally off the open, selling off, and bouncing. The only difference was the late-day sell-off that started after 3:30 and went into the close. In terms of the markets’ overall tone, they were firm early and weakish late. In terms of the overall trade, volume was higher at 1.2 million contracts traded.
There is an old saying in the markets and it’s called ‘wash, rinse, repeat’, and that seems to be how things have been working. The ES fell just 8 handles short of its 4238.25 all-time contract high. As I said in the MrTopStep chat ‘how is it possible that the ES could get so close to all the big buy stops and fail?’ and my answer is that the ES used up a lot of buying power on Globex and the gap up used the remainder.
I am not changing my mind on the direction of the S&P. It’s just too close to highs not to take them out. Will that happen today? I have been saying it will for over two weeks so I can’t give up now. I think once the ES finally does take it out it may be a quick trip up to 4265.
Our view: I want to continue to buy the pullbacks. The ES is stuck in a large ‘back and fill’ pattern and once the algo’s lock and loan on the buy stops above 4237.70 it’s going to be off to the races. Our lean, gap-up opens have been getting sold and I can’t guarantee that won’t happen again today but the trend is your friend and right now that means buying the pullbacks.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
As always, please use protective buy and sell stops when trading futures and options.
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