Short-Term Short Squeeze or a New Bottom?
Bulls have momentum, but keeping it is another question.
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Our View
You can thank the crappy jobs number for feeding the FRY-day options short squeeze. While the number was far stronger than analysts expected — 336K vs 170K — investors worry about it pushing the Fed into another rate hike before year-end.
(Friendly FYI — we’ve got plenty of Fed speak today. Just take a look at the calendar at the bottom).
I was told by a guy who worked at one of the large banks that there were a lot of institutional “short hedges taken down.” The short squeeze consisted of option margin calls, option collars, short hedges being lifted, and buy stops and buy programs mixed in with real cash buying.
When you get this type of price action, the algo and HFT bots have a field day — they don’t let the ES go down much and gobble it up when it downticks because they can see the cash.
Our Lean
Let’s keep it short and sweet today: The markets may bounce today, but if and when they do, I want to sell the bigger rallies while keeping in mind the levels below. Remember one of Mr Top Step’s trading rules: The ES tends to go sideways to lower after a big up-move.
As for levels, @HandelStats says this about the ES:
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Upside: Trade and hourly close above 4316.88 targets 4325.43, then settlement at 4345.75. Above there needs an hourly close above 4351.91 to target 4364, then 1 sd at 4380.92.
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Downside: Trade and hourly close below 4304.75 targets 4288.50, then -2 sd at 4275.42. An hourly close below there targets 4260.62, then 4248.75, then -3 sd at 4240.25.
MiM and Daily Recap
![](https://media.beehiiv.com/cdn-cgi/image/fit=scale-down,format=auto,onerror=redirect,quality=80/uploads/asset/file/48ac6509-2f00-4af6-9187-ee809ab63011/ES1__2023-10-09_08-03-44.png)
15-min ES recap
The ES traded up to 4305 and down to 4242.25 on Globex after the unemployment number came in, then traded 4266.25 on the 9:30 futures open. After the open, the ES rallied up to 4276 at 9:34, dropped down to 4256.25 at 9:41, rallied up to a new high at 4273 and then sold off down to a new low at 4251.50 at 10:09. From there, it rallied up to 4265.75, sold off down to a higher low at 4253 and it was that low that led to one of the largest rallies in quite some time.
I could do all the little 3 to 5-point pullbacks, but at 12:02 the ES traded all the way up to 4369.50 and then pulled back to 4323 at 12:25 and ripped 14 points straight up to 4344 at 1:35. The ES sold off to 4340 and then made a new high at 4345.50, back-and-filled for the next 43 minutes, and rallied up to three new highs: 4356.00 at 2:26, 4358.00 at 2:43 and 4358.50 at 2:49, and then dropped 10 points down to the 4348.50 level at 3:05 before bouncing back up to 4356.25. From there, it started selling off as the early imbalance showed $565 million to sell. The ES traded 4352.25 as the 3:50 cash imbalance showed $3.6 billion to sell, sold off down to 4240.50 at 3:59 and traded 4340.50 on the 4:00 cash close. After 4:00, the ES traded 4339.75 and rallied up to 4346.50 and settled at 4345.25 on the 5:00 futures close, up 58.75 points or 1.33% on the day.
In the end, the three parts to the trading session could not have been more clear. What happened on Globex — 4305 down to 4242.25 — what happened after the 9:30 open — 4251.50 to 4339 — and what happened in the last hour — where it sold off from 4356.50 down to 4339.75. In terms of the ES’s overall tone, with the exception of the early session pullback, the ES was firm all day; it was one pullback and 5 buy programs all day long. In terms of the ES’s overall trade, volume was high: 453k traded on Globex and 1.669 million contracts traded on the day session for a total of 2.12 million contracts traded.
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Technical Edge
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NYSE Breadth: 74% Upside Volume
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Nasdaq Breadth: 68% Upside Volume
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Advance/Decline: 64% Advance
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VIX: ~$18.50
ES
Initially moved lower, then a big rebound to the upside.
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ES Daily
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Upside: Trade and hourly close above 4316.88 targets 4325.43, then settlement at 4345.75. Above there needs an hourly close above 4351.91 to target 4364, then 1 sd at 4380.92.
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Downside: Trade and hourly close below 4304.75 targets 4288.50, then -2 sd at 4275.42. An hourly close below there targets 4260.62, then 4248.75, then -3 sd at 4240.25.
NQ
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NQ Daily
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Upside: Trade and hourly close above 15040.25 targets settlement at 15132.75. An hourly close above there targets 15203.70 to 15222.75. Hourly close above there targets 1 sd at 15292.75. Hourly close above there targets 15408.25, then 14426.75, then 2 sd at 15452.75.
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Downside: Trade and hourly close below 14981.25 and -1 sd at 14972.75 targets 14863.25, then -2 sd at 14812.75. Hourly close below there targets 14744, then 14700.62, then -3 sd at 14652.75.
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. Below entry and no need to stick around in JPM.
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Economic Calendar
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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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