Room for a Bounce?
Bonds remain weak
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Our View
There are lots of things weighing down on the S&P right now, but this is front and center.
There is $2 billion of equities for sale as the pension funds rebalance positions and $36 billion in S&P stocks for sale this week tied to the CTAs. Plain and simple, there is plenty of selling around.
Another thing flashing warning lights is the TLT. I recently flagged the bonds, but the selling has not relented. The TLT has made new lows in both sessions so far this week and is trading at its lowest level since Q1 2011. Further, it’s down 50% from its 2020 high.
Is the weakness in bonds telegraphing more weakness in stocks?
Our Lean
I don’t think the selloff is over, but I also can’t rule out a short-term oversold bounce. My idea is that we are in an end-of-the-quarter walk away.
Our Lean is still to sell the 20 to 30-point rips, but honestly, I can’t rule out buying a dip if yesterday’s 4305 area holds. Below I agree with @Handelstats about today and a down day on Thursday, but we differ on Friday. I think by 11:00 Friday morning will be when the actual walk away will begin.
HandelStats Levels
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HANDEL: $ES Upside: Hourly close above 4331.75 targets 4343.38 above there the +1 standard deviation level is 4357.15. Hourly close above there targets 4364 and 4368.12, hourly close above there targets 4382 then 2 sd.
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HANDEL: 41s Downside: Hourly close under 4331.75 targets 4326.75 then 4321.75. Hourly close under has settlement 4320. Hourly close under there targets 4304.50, and under there 4279.84.
Today is a bonus day. Rich Miller from @HandelStats did a study for the remaining 3 sessions of the month.
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Today has been up 8, down 7 of the last 15 occasions.
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Thursday — the day before the last trading day of the quarter — has been down 12 of the last 15 years and down 8 of the last 10 years.
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Friday — the last trading day of September — has been up 9, down 6 of the last 15 years, but up 7 and down 3 in the last 10 years.
Here are the stats for today, (the 3rd to last day of the month):
Here are the stats for Friday, the last day of the month:
MiM and Daily Recap
ES Recap 15-min
The ES opened Globex at 4383.50, sold off down to 4344 and opened Tuesday’s regular session at 4346.25. After the open, the ES rallied up to 4354 and I said in the chat:
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IMPRO: Dboy :(9:53:00 AM) : The ES goes to 4300 either today or tomorrow
From there, the ES took out the Globex low and traded down to 4325.25 at 10:20. After the low, the ES rallied up to 4343, dropped down to 4321.25, back-and-filled in a 4- to 6-point range and then traded up to 4335.50 at 1:17. The ES traded down to new low at 4305.50 at 3:28 as the early imbalance ‘flipped’ from a sell to $360 million to buy and traded up to 4314.75 at 3:44.
It traded 4309.00 as the 3:50 cash imbalance showed $1.55 billion to sell and traded 4314 on the 4:00 cash close. After 4:00, the ES traded up to 4322.75 and settled at 4319.50, down 63.25 points or -1.44% on the day. The NQ settled at 14,725.25, down 225.5 points or -1.51%.
In the end, do you know what this selloff is about? It’s all part of the end-of-quarter walk away. The ES isn’t falling 80 or 100 points a day; it’s falling 40 to 60 points and every time it short-covers, people think the low is in — I don’t.
In terms of the ES’s overall tone, it was weak. In terms of the ES’s overall trade, 290k traded on Globex and 1.247 million traded on the day session for a total of 1.537 million contracts traded.
Technical Edge
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NYSE Breadth: 12% Upside Volume (!)
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Nasdaq Breadth: 33% Upside Volume
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Advance/Decline: 15% Advance
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VIX: ~$18.25
ES
Using Rich Miller’s levels today as laid out in the Lean. However, notice below how key the 4305 area is:
ES Daily
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Upside Levels: 4382-84, 4390, 4398, 4407, 4417 and 4450-52
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Downside levels: 4333-38, 4320, 4308-10, 4300 and 4290
CL
Oil continues to trade well. My upside levels remain the same: $94 could be in play if /CL takes out the recent high near $92.50.
CL Daily
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Upside Levels: $92.50, $94, $98
Guest Post
PTG Daily Trade Strategy / 3 Day Cycle
Author: David D Dube` (a.k.a. PTGDavid)
Website: https://polaristradinggroup.com/
Prior Session was Cycle Day 2 (CD2): Aberrant session for CD2 as liquidation selling drove price down to 4300 zone. Prior range was 76 handles on 1.673M contracts exchanged.
…Transition from Cycle Day 2 to Cycle Day 3
This leads us into Cycle Day 3 (CD3): Price will need to recover 4338 handle to avert a failed three-day cycle. Also, many technicians are looking for a time and price cycle low. As such, scenarios to consider for today’s trading.
Bull Scenario: Price sustains a bid above 4320, initially targets 4335 – 4340 zone.
Bear Scenario: Price sustains an offer below 4320, initially targets 4290 – 4285 zone.
PVA High Edge = 4338 PVA Low Edge = 4307 Prior POC = 4315
*****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 3 (CD3)
Thanks for reading,
PTGDavid
Open Positions
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 break-even (B/E) or better stops.
** = previously mentioned trade setup we are stalking.
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JPM — Many are long from $143-145. This is a longer term swing. Trimmed $153s, then $157.50+ on 7/24.
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Down to ½ position vs. Break-even stop. Can make small, ~10% position trim if we see $160+
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If worried about a larger correction, can sell/trim north of $150
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XOM — Long from the monthly-up area at $108.50 — Trimmed ¼ at $112.50+ and ¼ at $115+. Now we have another ¼ peeled off at ~$118. If we see ~$120, can consider a final exit or hold for a longer-term swing. Up to you.
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Break-even or better stops
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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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