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Don’t forget…if interested in the webinar from Rich Miller — AKA @Handelstats — please register for the Study on Year Highs and Lows by Month in the SPX on Aug 16, 2023 at 11:30 AM EDT here. (After registering, you will receive a confirmation email containing information about joining the webinar).
This is supposed to be a 30-min webinar but Rich expanded the studies (here’s the expanded, updated study). He’s very smart and these are just a fraction of his work. I will be in the webinar and then like you, listening to what Rich has to say!
Danny and I were talking the other day and he asked if there was anything that we could tell about the market after the strong month of July. This is a snapshot of the study that followed.
1. “Since 1970, there hasn’t been a single instance where the S&P 500 experienced a rise for only a single year. It has consistently shown an upward trend for a minimum of two consecutive years before any subsequent downturn.”
2. When the market is up for the year at the end of July, 38 of 53 years, 32 of those years, (84.21%) December closes higher.
3. September is the only month with a negative average return
One of the things that makes the MrTopStep chat room special is that there is no main person calling out trades. Why? I could mention countless forums that have failed because it’s too hard to call winning trades everyday all year long.
Eventually, those losing trades will cost people a lot of money and the people that paid for the chat will disappear. They don’t pay for losing trades — no one does and nor will they ever.
I have always said MrTopStep is a collective of traders all sharing charts, levels, news, options gamma and program trading. A few weeks ago, the PitBull — who pops into the room from time to time and talks a little bit — said something about how hard it’s gotten to trade the ES. My response was that no one can keep up with everything. Thus the collective of traders, which I am extremely proud of.
For instance, at yesterday’s 4458.50 low I asked for levels and the room put out the 4459 level and I bought 3 ES at 4460 and made money on all 3 contracts.
Tell me I’m wrong, but it seems like things are ganging up on the S&P. After an 11-day correction (with 8 declines, 1 flat day and 2 up days), the ES bounced back up to the 4518 area in Tuesday’s overnight session and the 50 to 60 point dead-cat bounce was sold, which was the case yesterday.
Our Lean: The ES rallied 529 points from May to July and has only retraced 180 points from its recent 4634.50 high. I’m not saying it has to, but the 50% retrace of that rally sits down at 4370 or about 263 points off the high.
Selling rallies is working and until it doesn’t, I think it’s important to stick with it. That doesn’t rule out buying a dip, but I don’t want to get thrown off the current trend. I think there is a good possibility the ES trades 4400 to 4420, but as always it won’t go there without a few dead-cat rallies. I will also ask Sidd@MrTopStep to add what he is looking for on FRY-day’s August option expiration.
Let’s face it — the news isn’t good, but let’s see how things go today first.
After rallying up to 4517.75 and falling to the 4470 level on Globex, the ES opened Tuesday’s regular session at 4487.25. After the open, the ES traded up to 4491 and that’s when Jim Mayo posted this in the MTS chat:
The ES then sold off 31.50 points down to 4458.50 at 10:37. After the low, the ES rallied back up to the VWAP at 4478 at 12:04 and then dropped down to 4460.75 at 1:40. While I have not included every pop and drop, you can see yesterday’s trade was more about the larger moves with less ‘chop.’ After the low, the ES rallied up to 4470.50 at 2:48 and sold off down to 4447 at 3:43 as the early imbalance showed $673 million to sell, traded up to 4451.25 as the 3:50 cash imbalance showed $3.2 billion to sell and traded 4454 on the 4:00 cash close. After 4:00, the ES traded in a narrow range and settled at 4452.50, down 54 points or -1.20% on the day.
In the end, it was a news-related selloff, but this time the ES didn’t shake it off…it sold off. In terms of the ES’s overall tone, it was weak. In terms of the ES’s overall trade, volume was steady: 303K traded on Globex and 1.126 million traded on the day session for a grand total of 1.431 million contracts traded.
So far, this is the intermediate-term correction that we were looking for. That’s not a horn-toot, just a fact. August and September are the weakest two-month stretch for the market, so it’s no surprise that we’re seeing a mild pullback.
The risk is that “mild” turns into something more severe.
Now sitting at intermediate-term support (AKA, using the weekly charts) and it’s key that the market holds this area.
We’re not falling apart per se — for instance, many investors may be overlooking the fact that the Nasdaq is actually up so far this week. However, if the market can’t hold in this week, our standard 3% to 5% correction turns into something bigger.
Notice how we have avoided new individual stock setups all month long (with the exception of XOM, as energy continues to trade pretty well). That is/was in anticipation of some seasonal weakness. If the market holds in and pushes higher, we can start to look for some rotations as well.
Daily chart, then a 4-hour chart.
Yesterday’s action was a bit ugly, but as the daily chart shows, the SPY is still technically okay. It’s holding the major levels — 10-week ema, 61.8% retracement, etc — but at the same time, yesterday’s close felt as if it deliberately took out last week’s lows…
…However, we did get the gap-fill at $443 (from July 11). After declining in 8 out of 11 sessions — and really more like 9 out of 11 — can the S&P get more than a dead-cat bounce going?
Upside Levels: $443, $448, $451 to $451.50
Downside Levels: $442 to $443, $437.50
Gap-fill, 61.8% retrace, 10-week ema. If the SPX is going to bounce, this would be a good spot for it to find its footing.
Upside Levels: 4458-64, 4480, 4500, 4527.50
Downside Levels: 4435-44 (wide range), 4400, 4385-88
We broke that collection of lows between 4460 and 4470 and now bulls are tasked with regaining this area — and quick.
If they don’t, the charts turn decisively more bearish, opening the door down to 4425 and possibly lower.
On a rebound, look for that Q2 high to act as resistance intiailly, in combination with the 50-day and 10-day moving averages…call it 4485 to 4493, with an overshoot putting 4500-03 in play.
(Remember that our 4493-4503 area has been vital).
Upside Levels: 4485-4493/4500-4503, 4512-15, 4540-42, 4550-60
Downside levels: 4447, 4425, 4370
Weekly still looks fine though:
You may not believe it, but the NQ is actually up for the week and the weekly chart still looks okay. That narrative changes if we break and stay below 15,000.
15,300 remains a hurdle, but as long as that 15K area holds, bulls are okay. A sustained break opens the door to the 14,750 to 14,850 area.
Upside Levels: 15,300, 15,450-525
Downside levels: 15,000-30, 14,750-850 (admittedly a wide range)
So far, this correction isn’t a disaster, but it’s building up some upside hurdles. For the QQQ, the first hurdle is at $370 to $372.
$363.75 to $364.50 is very key on the downside.
Upside Levels: $370 to $372, $374.50
Downside levels: $363.75 to $364.50, $360
I have a small long in UNH and have been waiting for an upside rotation through $513 to $515 for weeks now. It tends to open strong, then fade, but if the markets turn higher and UNH gets going up through this zone, a move into the $530s could be next.
A riskier play may be buying the dips down into the low-$500s, but that’s a RORO setup — Right or Right Out.
Sub-$500 is the risk, so a weekly rotation has a bit more at stake from a risk perspective, so keep that in mind in regards to position size. Calls or call spreads could work well in this case, likely with the September expiration.
Topic: Taylor 3 Day Cycle
Author: David D Dube’ (a.k.a. PTGDavid)
Prior Session was Cycle Day 2 (CD2): Risk-Off was the prevalent sentiment throughout this session, as price challenged CD1 Low (4465). While holding the majority of the day, succumbed under constant selling pressure for the closing rotation and fulfilled the lower Cycle Violation Level (4465). Prior range was 70 handles on 1.430M contracts exchanged.
…Transition from Cycle Day 2 to Cycle Day 3
This leads us into Cycle Day 3 (CD3): Having closed below the CD1 Low (4465), historical odds do favor reclaiming this level during RTH. Should the price not rally back above, then it would be marked as a “failed” 3 Day Cycle, which has only occurred 7% of the time, covering 12 years. As such, scenarios to consider for today’s trading.
Bull Scenario: Price sustains a bid above 4455, initially targets 4470 – 4475 zone.
Bear Scenario: Price sustains an offer below 4455, initially targets 4440 – 4435 zone.
PVA High Edge = 4488 PVA Low Edge = 4460 Prior POC = 4465
*****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:
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.
JPM — Many are long from $143-145. This is a longer term swing. Trimmed $153s, then $157.50+ on 7/24.
Down to ½ position vs. Break-even stop. Can make small, ~10% position trim if we see $160+
ARKK — Long from ~$46 — trimmed near/at $50. Still carrying ⅔ to ¾ of position. Trim at ~$52
Added back about ⅓ of our position around $45.50. Keep in mind, there could be room down to the 50-day moving average.
WMT — Went weekly-up over ~$156 — Trimmed above $157.55 and then $158. Down to ½ position with trim at $160+, trimmed the add portion above $159 (a high of $161.19 on 8/7). Down to ¼ or less here as we got $162.50 yesterday and earnings are on tap.
XOM — long from the monthly-up area at $108.50 — First ¼ or ⅓ trim is ~$112.50. Stops at $104.
**CRM — Would still love to see a dip down to the low-$200
Feel free to build your own trades off these relative strength leaders
Relative strength leaders →
(Lack of updates here but these names remain my top focus list!)
Energy stocks — VLO, SLB, EOG
AI stocks — NVDA, ADBE, SMCI
Mega cap tech — META, GOOGL, AMZN
Select retail — ELF, LULU, COST
Homebuilders ITB — TOL, KBH, DHI
BRK.B (new all-time highs)
Cruise stocks — RCL, CCL
DAL, DT, AMAT
Relative weakness leaders →
PFE (all vaccine gains now gone)
EL, FL, DG
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!