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Our View

We wanted to get this out a little earlier before the NFP report at 8:30 ET.

I was quick to say that I could not buy the ES just after the open and our 4020-4030 resistance level held firm. Not long after, RealTraderDave pointed out the weakness in the banks. PitBull taught me a long time ago that when the banks fall, so do the markets. That was clear yesterday. 

I don’t need to read the Wall Street Journal or watch CNBC to know that the markets are rolling over. 

All you have to know is that a Pimco commercial real estate fund defaulted on $1.7 billion a few weeks ago, cryptocurrency bank Silvergate has blown up and is shutting down operations and Silicon Valley Bank (SIVB) is in trouble. It fell 60% yesterday, sparking a massive loss in regional bank stocks (like KRE). SIVB is down another 40% in the pre-market. If it opens here, shares will be down 76% in two days. 

In yesterday’s update, we flagged the KRE breakdown, as well as the failed support in HYG and JNK. Those are worth keeping an eye on over the next several days. 

My question is, is this the beginning of the next financial crisis or is there some sort of contagion risk here? It sure looks that way by some of yesterday’s price action. 

Our Lean

I know the markets are oversold but today’s jobs report could be the next nail in the coffin. In fact, it’s all about the jobs report today. 

Last month, the January report showed more than 500,000 jobs were added, more than double economists’ expectations. I obviously don’t think we’ll see that figure today, but if it comes in hot, the S&P is in trouble. Lower-than-expected results could help erase some of yesterday’s ugly action. 

If the ES starts going down hard, we could see some liquidation trades over the next few days. The Dow futures — /YM — could be the downside leader on this move. If 32,500 doesn’t hold, 31,600 is in the cards by Monday. 

Our Lean: If the ES gaps sharply lower, you would expect some type of bounce that should be sold. Levels below on charts. Be smart today — trade less! — pick your spots better and use stops. This could get real ugly if yesterday’s action spills into today.

MiM and Daily Recap

The ES traded up to 4008 at 9:00 on Globex and opened Thursday’s regular session at 4002.50. After the open, the ES rallied up to 4019.75 for the daily high at 9:50, dipped, then bounced up to 4015.75 at 10:45. From there, it was all downhill, as the ES tumbled down to 3909.50 at 3:20 before a late-day bounce ahead of the MIM. 

The ES traded 3927.50 as the 3:50 cash imbalance showed $750 million to sell and traded 3920 on the 4:00 cash close. The ES settled at 3919 on the 5:00 futures close, down 77 points or 1.9% on the day.

In the end, the selloff was broad and vicious. In terms of the ES’s overall tone, it was a non-stop, continuous sell program. In terms of the ES’s overall trade, volume was high at 2.47 million contracts traded. 

Technical Edge — 

  • NYSE Breadth: 7.5% Upside Volume (!!)

  • Advance/Decline: 13% Advance (!)

  • VIX: ~$22.75

We almost got ourselves a 90/90 downside day, where breadth and the advance/decline figures are both below 10% on the day. The A/D measure narrowly avoided it. 

Still, yesterday’s action was quite ugly. 

In regards to the AVGO and CRM setups from yesterday, they did not quite trigger (surprisingly), but man, I am apt to step aside from fresh longs in individual stocks at the moment. 

Yesterday’s move was…how do I say it? “Alarming” may not be the right word, but kind of. 

Keeping today’s outline tied strictly to the indices for now.

S&P 500 — ES 

After a look above Wednesday’s high, Thursday’s action fell apart quickly, sending the ES down to last week’s low and the vital 3920 level (remember that one?)

For now, this area is holding, but I wouldn’t put too much emphasis on it. It will all come down to the jobs report today, or least for the first half of today. 

The Trade: Watch 3910-20. That’s the key pivot and yesterday’s low. Last week’s low is at 3925. 

A flush of these measures puts 3900 in play, then 3878.50 — the 78.6% retracement. 

I don’t necessarily expect 3820 to 3840 today — down 2% to 2.5% from yesterday — but that’s where this could head if 3878.50 fails. 

On the upside, 3950 is a key level to regain. That’s followed by 3965 and 3978. Ultimately, 4,000 is still resistance. 


SPY daily

Daily chart above, weekly chart below for SPY. 

The SPY is into a big area on the downside, with last week’s low, the $390 pivot and the 61.8% retracement. If this area folds, $384 is on the table, then the $378s. 

On the upside, SPY needs to regain the $393s. Above that and $396 to $397 may be resistance. 

SPY weekly

In yesterday’s update, we noted the potential for a bearish engulfing week, as the S&P 500 opened above last week’s high, failed on the push higher and is now below last week’s low

That sets a very bearish tone — but we still have to get through Friday. 

Could it ultimately set up a test of the 200-week moving average? Perhaps. But sticking with today’s action, the weekly close for the SPX and SPY is vital. 

Nasdaq | QQQ & NQ

NQ daily

NQ futures above, with the QQQ below (both daily charts). 

Both the NQ and the QQQ are holding up better than its S&P counterparts. On a bearish reaction today, watch last week’s low. 

For the NQ that’s 11,832. 

For the QQQ that’s $288.37.

These measures are less than 2% away from yesterday’s low, so a similar or worse decline than Thursday puts weekly-down on the menu (and would firmly bury the S&P). 

It would also mean that the QQQ and NQ will lose the 200-day and 50-day moving averages as support, just as the latter was trying to cross the former. That’s what many traders refer to as a “Golden Cross,” a typically bullish signal. 

In any regard, keep an eye on these downside levels today. 

On the upside, let’s see how the NQ handles the 11,500 to 11,550 area, which bulls want reclaimed. For the QQQ, that’s $296.50 to $297.50. 

QQQ Daily

Note: Losing last week’s low would also trigger a bearish engulfing candle.

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 B/E or better stops.)

  • ** = previous trade setup we are stalking.

  1. MRK — Long from ~$110 and (disappointing action as it was oh-so-close to our first target, missing by a few dimes) — Ideal stop is clearly defined near $105. Initial target for ⅓ trim is $112.50. 

  2. Natural Gas, UNG or /NG — First target hit at UNG ~$10 and NG at 2.95 to 3.00. 

    1. Now /NG needs to hold the $2.40 to $2.50 mark in order for bulls to stick with this one. If it holds, I would love to see Friday’s highs hit again (the target of our prior trim). 

  3. AMD — Long on weekly-up over $81.63 — We got a third trim in AMD at $86 but not quite another trim at $88. That’s okay. B/E stop or full exit is fine. 

  4. SMCI — Got our $104+ trim target, then B/E stop as SMCI reversed and we were clocked out. 

Go-To Watchlist

*Feel free to build your own trades off these relative strength leaders*

Relative strength leaders → 

  1. NVDA, CRM



  4. WYNN, LVS → would love a reset to the 10-week ema

  5. GE → would love a reset to the 10-week ema

  6. FSLR

  • AQUA

  • TSLA


  • AEHR → volatile!

  • MELI

  • AXP → would love a reset to the 10-week ema

  • BA & Airlines — AAL, DAL, UAL

  • CAT

Economic Calendar

As we all know, there’s no crystal ball when it comes to trading stocks, options, or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk-free for 30 days.
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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