The MIM Has Been Dominating the Sell Side

Setting up for another “Fry-Day?” 

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Our View

According to the Stock Trader’s Almanac, the first trading day of June has the Dow up 26 of the last 33 occasions (78.7%).

The MrTopStep Market Imbalance Meter — otherwise known at the MIM — has always been a good indicator for following the flow of money moving in and out of stocks. I used to say, “If you want to know where the S&P is going, follow the MIM.”

However, over the last several months/weeks, the S&P has been going up while there has been mostly large sell imbalances. In some ways it doesn’t add up. If the big institutions are selling, why are the markets going up so much? I think it has to do with the big swaths of money moving in and out of stocks into bonds. We also can’t ignore that just a half-dozen names are driving almost 90% of the gains in the index.

They say timing is everything and as I was writing this, the early imbalance that was showing over $2 billion to sell just came out at $6.2 billion to sell and the ES dropped 15 points and the NQ fell 60 points in an instant.

A lot of what we have seen the last few days is various rotations, but the bottom line is that while the S&P and Nasdaq closed up 0.25% and 5.8% on the month, respectively, billions have been sold into the closes. This quarter alone, the MIM reveal total sits at $12.75 billion sold and it has had 11 straight MIM sales.

The only thing I can say is there is a lot of money exiting the stock market despite its gains. (Also, look at the MIM chart below. It highlights more data).

Our Lean

Here is my crazy view: The sellers let up today. That doesn’t mean they can’t sell off, but at some point the ES bounces and that will set up Jobs and options FRYday.

I think if the ES can get back above 4204, then the ES can trade back up to the 4240 area. On the downside, if the ES takes out 4174 and breaks below 4164, the ES could trade down to 4150-4140. That’s the structure I’m looking at. As for specific levels, I have marked:

MiM and Daily Recap

The ES traded up to 4217.75 on Globex and opened Wednesday’s regular session at 4194.75. After the open, the ES traded up to 4204.50 at 9:46, sold off down to 4176.25 at 10:27, back and filled, traded 4175, did another small round of back and fill, traded down a new low at 4174 at 11:37 and then rallied all the way up to 4199.25 at 2:16. After the high, the ES quickie dropped down to 4187.50 at 2:52 and then rallied up to 4203.50 and the early MIM showed $2.3 billion to sell at 3:46.

The ES traded 4200.75 as the 3:50 cash imbalance showed $6.3 billion to sell and traded 4191.75 on the 4:00 cash close. After 4:00, the ES traded down to 4187.25 and settled at 4188.25 on the 5:00 futures close, down 26.75 points or -0.63% on the day.

In the end it was a slow, choppy, downside day. In terms of the ES’s overall tone, it was weak, but did bounce off the 4175 support level. In terms of the ES’s overall trade, volume was high at 2.05 million contracts traded. The NQ closed down 0.75% or 108 points at 14,288.75, the YM closed at 32,929, down 50 points or -0.15%, the RTY settled at 1,750.90, down 20.30 points or -1.15%. The bonds settled higher, up 0.64% for its third straight day of gains.

Technical Edge

S&P 500 — ES

Yesterday, our “bolded” support level was 4175-80, which was the 10-day ema and the 50% retracement. Given that the ES isn’t in a trend, I was putting more weight in the 50% retracement than anything else. It was good for an intraday bounce, but the bulls have more work to do.

SPY

Pretty similar setup in the SPY yesterday. Now it needs either a daily-up over $419.22 to put $420+ back in play or daily-down to open up more selling pressure.

SPX

NQ

Nice consolidation so far. The 10-ema on the 4-hour (regular trading hours) chart (so, not Globex) could act as some support. Otherwise, bulls may choose to wait for a more classic reset, like the one below on the daily chart:

QQQ

Here’s the H4 setup on the Qs, for a different perspective:

SHOP

One setup I have been watching for a few weeks now is SHOP. A once-hated growth stock, this one could be setting up for a retest of the Q1 high near $54.50. If it lines up with the 10-week moving average, a small long position may be warranted.

If it sets up, we could play with a stop-loss of about $2 (maybe a little more), but size right and it’s okay. A tight stop isn’t a bad idea, as SHOP may want the 50-day + uptrend support instead. Stay open-minded with this one.

Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B. Now Add META, AVGO, UBER, CRM and AMZN.

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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!