Remember What We’ve Said About Mondays — Slow & Steady
Friday played out well for the bulls. Now they need to play defense too.
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Our View
Trading is not getting easier, nor is investing — none of it is easy. From the very wealthy to the small investor, where do you invest?
Bonds, real estate, metals or the beaten down stocks that were victims of the Covid-19 pandemic that have never really rallied? Or do you just go all-in on the 5 to 12 market leading names? You can like the markets or dislike them, but one thing both parties can agree on is that the markets are going up right now.
One of the questions I get asked all the time is, “when is it a good time to buy stocks?” Call me a simpleton, but I always say the same thing. “After they sell off.”
Obviously, that’s not an easy thing to answer, especially when the rally is so narrow and only a few names. It’s also hard when you don’t know the other person’s risk tolerance or time horizon.
Our Lean
Today we should see significantly lower volume and trade. Remember, Mondays have been the low-volume, choppy action of the week so far this year.
Should the ES gap higher, my lean would be to sell the open/the early rallies. If the ES opens lower, I think 4275 should be a good support. Ideally I think we could see an early-week pullback.
MiM and Daily Recap
The ES traded up to 4257 on Globex and opened Friday’s regular session at 4254.75. From there, it immediately rallied up to 4273.75 at 9:44 and then sold off down to 4249. rallied up to 4168.25 at 10:16 and that’s when I put this in the MrTopStep chat:
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IMPRO: Dboy :(10:37:02 AM): going to 4286-90 today
The ES pulled back to just above the VWAP at 4257.50 and then made four separate new highs at 4270.75, 4277.50, 4286.25 and 4287.25, pulled back down to 4277.25 and then back-and-filled its way up to a new high at 4291.50 at 1:01. The ES made another new high at 4294 at 1:31, rallied up to 4297.75 at 3:47 and traded 4291.50 as the 3:50 cash imbalance showed $2.2 billion to buy and traded 4289.25 on the 4:00 cash close. After 4:00, the ES traded in a narrow range and settled at 4288.75 on the 5:00 futures close, up 60.75 points or +1.44% on the day.
In the end, everything went according to plan during the Fry-Day Jobs/option squeeze. In terms of the ES’s overall tone, it was firmer than the NQ. In terms of the ES’s overall trade, volume was on the high end of what we have been seeing at 1.88 million contracts traded.
Technical Edge
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NYSE Breadth: 81% Upside Volume (!)
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Advance/Decline: 86% Advance (!)
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VIX: ~$15 (On Friday it hit the lowest level since June 2021)
Like Our Lean says, it’s hard to rush out and be a full-on bull on the open and through the day, particularly given the action we saw on Friday. A move above Friday’s high and a flush below it could put some short-term “risk-off” in play as we did have a strong finish on Friday.
This morning’s push looks like we should be able to make a small trim in SBUX. Bonds/TLT could still give us a trade based on last week’s criteria.
S&P 500 — ES
The ES burst over the 4242 area, which was major resistance since October. Bulls now want to see this level hold. On an intraday basis, we want to see 4275-ish hold as support.
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Upside Levels: 4300, 4310, 4336, 4382
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Downside levels: 4267-75. I would really like to see this area hold on the dip.
SPY
How do we like that $427.50 extension? From here, keep an eye on Friday’s high. Above it puts the 61.8% retrace of the bear-market range in play at $429.61.
SPY Daily
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Upside Levels: $428.75, $429.50 to $430
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Downside Levels: $425.75 to $426.25, $425
SPY Hourly
Those are the downside levels in the SPY. The first levels is the H1 10-ema and the 50% to 61.8% retrace zone. The second level is the 78.6% retrace, one of my favorites, (but I doubt to see that today).
Here’s what it’s like for the SPX:
SPX
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Upside Levels: 4290, 4311, 4321
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Downside Levels: 4260-4266, 4250
SPX Hourly
NQ
I would like that 14,200 to 14,250 area on the NQ. AKA prior support + the 10-day ema. Friday’s range could contain any meaningful move today, so watch 14,628 on the upside and 14,468 on the downside.
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, UBER, CRM and AMZN.
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MDLZ — We got the gap-fill and 10-ema/50-day sma tag. I would trim ¼ to ⅓ on any push over Friday’s high of $74.36, so we can raise stops to B/E ($73 to $73.50). $75.40+ would be the next trim area.
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SBUX — Long from $98.90, defined low at near $96.50. So $96 to $96.50 stop work fine. Small trim here (¼ or so on any push over $100. Pre-market is fine.
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Ideally want a trim between $101.80 and $103, but have to play the cards we are dealt. Trim at $100 and raise stops to B/E.
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** TLT — I don’t know if we’ll fill the gap at $99.65-ish, but I will get long if we trade the mid-$99s and it holds as support. Setting up.
Go-To Watchlist
Feel free to build your own trades off these relative strength leaders
Relative strength leaders →
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MCD, PEP & KO, WMT, PG — group has been faltering, though!
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LLY, CAH
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NVDA, CRM, AMD, AVGO
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MSFT, AAPL, META
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LULU, CMG, ELF
Relative weakness leaders →
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PYPL
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MET — worked really as a short, but I was taken out at B/E after we got our first trim
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CF, MOS
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PFE
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GLOB
Economic Calendar
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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