FryDay , OPEX
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Our View
First off, if you feel like it’s gotten harder and harder to trade you are 100% correct. The PitBull and I both agree that there are some new and enhanced algos pushing the markets around, they do what’s called sweeps. The ES trends higher, pulls back a little, and then drops 20+ points in a few minutes. We have seen a lot of this over the last 2 or 3 months and it usually recovers quickly. I don’t think there is a big reason to be pressing bets this early in the year.
During the sell-off off, I never changed my opinion about the ES going to make new highs. Sure the ES sold off but as I pointed out, the sell-off will feed the markets higher. Out of 12 sessions so far this year, the SPX has managed to close higher in 4 and 1 just barely. While that may seem like a negative, I disagree. After a 700-point rally and a new year there is bound to be pullbacks. But I did not think the current one was the beginning of a big letdown. Yes, there could be a letdown, it’s all part of the shake-out process but I still think the ES is going up, and stories like the Wall Street Journal article linked below support that belief. I could have pulled a bunch of the story out and made my own but I like the Wall Street Journal and it’s a well-written article. Will $8.8 trillion go into stocks? I highly doubt it but a good chunk of it will.
Handelstats Levels
$ES Currently trading 4839.50. Upside: Hourly close above 4841.25 targets 2 sd 4867.90 then 4870.80 and 1sd weekly 4871.64. Hourly close above there targets 3SD 4897.23. A Friday close above 4870.80 almost guarantees 4997.85 that I pointed out at the beginning of the month as my month end target.
Downside: Hourly close below 4835.25 targets 4824.88. Trade and hourly close below there targets 4814.50. Trade and hourly close below there targets settlement 4809.25. Trade and hourly close below there targets 4790, 4789.50 area, hourly close below there targets -1sd 4779.92. More in review.(A breakout today will enable me to pick a new upside target. If it does happen you will be amazed at what I project.)
Our Lean
Say hello to the week 3 FRYday options expiration and new highs. Yesterday it was all buy stops, buy programs, and margin calls. Just a few days ago the short option premium sellers were counting their money and now they are scrambling. I do not think that scramble is over. I have a rule that it takes days and weeks to knock the ES down and only one to bring it back and that’s what it looks like. My thought is we see an early push-up, pullback, and then an attack on the upside late. How you get from Point A to Point B is your deal. One concern, if the ES rallies on Globex and opens higher, the gap sellers will show up.
MiM and Daily Recap
The ES traded up to 4797.50 on Globex and opened Thursday’s regular session at 4785.75. After the open, the ES back and filled above the vwap, traded up to 4790.75, dropped down to a 4779.75 double bottom at 10:04, and then rallied up to 4795.00 at 10:51. After the high, the ES sold down to 4782.50, 1.25 points below the vwap and then rallied up to 4796.25 at 11:40. After the new high, the ES sold off down to 4780.50, did some sideways to down back and fill, sold off down to 4770.00 at 1:07, and then rallied 35.75 points up to 4805.75 at 2:32. The rally was followed by a pull back to the 4795.50 area, then the ES did a little back and fill at the highs and rallied up to a new high at 4812.50 at 3:49 as the NYSE order imbalance showed $323 million to buy. The ES then traded up to 4817.00, pulled back to 4808.50 and traded 4809.50 on the 4:00 cash close. After 4:00, the ES moved in a 4-point range and settled at 4810.75 on the 5:00 futures closed up 41.50 points +0.84%, the NQ settled at 17.110.00, up 1.42%, and the RTY(Russell) closed up 0.53%.
In the end, all I have to say is… buy stops and buy programs. In terms of the ES’s overall tone, very bullish without some pullbacks. In terms of the ES’s overall trade, 290k traded on Globex and 1.226 million on the day session for a total of 1.516 million contracts traded.
Spot Gamma
The price is about in between the VT and the Call Wall. We generally prefer the advantage of trading near major support/resistance levels because there can be strong edge in this. For example, you could set tight stops right under support and then play for a decent bounce. The strongest strike is 4750 and this visibly is support. 4800 has been the Call Wall for a long time, but now we finally see some call gamma form at 4900. Structurally, this is an invitation for growth. However, The SG Gamma Index™ did clock a slightly negative number (-0.051) before prices recovered, which shows there is not much of a buffer before elevated volatility would be modeled to take over.
Going into tomorrow and the monthly opex, there is only a moderate amount of gamma to lose. But for now, after that strong V, the market is slightly on the right side of a structural advantage for keeping volatility low.
Guest Post
Disclaimer: For educational use only. I’m not dispensing financial advice. We are having an intellectual conversation (you and I) on the topic of trading the Emin futures using the Lens of Wyckoff Principles and the Eyes of WB’s Clock. The clock that controls all turns intraday, every day!
Yesterday’s Technical Review using
WB’s Emini Clock and Wyckoff’s Tape Reading Principles
From yesterday: Looking at the Weekly Pivot at the top of the page you see 4788.75 as the water level mark for the bulls and the bears. I trust you were looking at the 88 handle yesterday. It was a tug of way getting past that handle.
From yesterday: By my eye, bulls are showing strength. Price moved down but was unable to gain a following to follow on increased volume. Price rallies off the lows on increased volume and closes almost to recover the day’s high.
From yesterday: Last Night: As I said on page 4, I’m just not seeing pressing supply and last night confirmed that by holding at the 3/8 retracement and then rallying to recover the CASH high. Edge: It’s now or never for the bulls. If they lose these supports could see a retracement back to the lows. 7/8/9 AM: Recovered the 70, 80, and now 90 and pressing higher. Today: Perhaps the low is in and it’s the bulls ball. Bulls Want: 00, 07, 12 Bears Want: 81, 74, 65.
It’s nice when you get an ear of corn. That’s a southern saying. I’ll let you fill it in. The clock will help show you the way. Not every day. And not every day as a strong trend. When the trend is in, WB’s clock is your friend.
From yesterday: My notion: Perhaps I’m just bullish biased it just looks to me that bears are unable to gain a following to take price lower. Each day we get the same intraday high pattern around 11:00 am to 12:00 pm and then price dips down in somewhat reduced volume. I’m just not seeing pressing supply. Cycle Bias: Favored to the bull.
After the market fell from its lofty highs around 11:30 am and found a bid at 1:30 pm (two hours later) that was it for the bears. Soap drop and bulls took possession of the ball and took price to the top.
It humors me how the pundits give all the credit a rally to the tech stocks. I hear someone taking a second extended week. Business needs to get done but they don’t want to do it. Did that rally the market? I don’t think so. I made a video that laid it all out before it happened. It’s the price volume and the interaction of price movement and volume over time that tell the tail of the tape.
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Looking Forward to January 19, 2023
The market is fractal. If you look at a 2-hour chart and compare it to a 60, 15, or 5-minute chart, often you’ll see the same price formations. From the middle of December, bulls have been trying to take out the 4830 and 4840 handle. I said in chat yesterday:
(8:49:57 AM) : good morning today is SERIES S3L with the spill up.
(10:26:47 AM) : price sees unable to remove itself from the gravity well of the weekly pivot
(11:41:54 AM) : this is a grind but a typical S3L day
(2:36:40 PM) : good to see the bulls get back possession of the soap
(2:42:20 PM) : IF price is going to go higher bulls will have to absorb alot offerings
Composite Man shook out all the weak hands, perhaps now he’s willing to start lifting offers.
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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!
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