The Negatives Are Piling Up While AAPL Gets Hammered
Can we get one of our favorite trading rules to pan out?
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Our View
I’m surprised the markets held up as well as they did yesterday. Nvidia and Apple struggled and both closed lower by more than 3%. In fact, all of FAANG — along with MSFT, AMD and TSLA — closed lower on the day.
Banks, real estate (REITs) and manufacturing weakness all seemed to overwhelm the markets. For the first time in a while, Tuesday’s weak close actually led to a selloff on Globex and continued into yesterday’s day session.
It didn’t help that the US dollar hit its highest level since March, while 10-year yields have sprung back to life. A strong dollar and higher yields is enough to give equities a headache, but then you throw in oil prices — which refuse to back down — and it’s just “one more thing” for the S&P to deal with.
Our Lean
Along with the headwinds listed above, the S&P is trying to fight off worries around the world, as German and Chinese economic data continue to flash warning signs. While the US data remains pretty strong for now, a global recession will put a major dent in business for our multinational firms — and there are plenty.
We’re trying to balance the immediate negatives — the weakness in tech and strength in yields and the dollar — with the trend, which has been pretty strong over the last six months.
The ES could not get through 4550, then it couldn’t hold 4500. Now it’s trying to hold above 4450 with a 4447 low. Is that a good low? It very well could be, as the ES is oversold and we’re going into the PitBull’s Thursday/Friday low the week before the monthly expiration.
If this setup works, we should see some type of low today, but — and there’s always a “but” — that doesn’t mean yesterday’s low is necessarily off the table.
If the ES takes out the 4447 low, then 4435-40 comes into play with a lot of sell stops underneath. On the flip side, if the ES can catch a bid above 4470, I think 4490 is in play, then 4510.
I think we bounce, but it’s going to be a long day and I can’t rule out some dips. The trading rule that goes along with looking for the Thursday low is to buy the ES if it closes weak.
We’re coming into the session under pressure, while the selloff in Apple is piling up. The first step is to see if the 4447 low holds and the go from there.
MiM and Daily Recap
ES 15-min recap
The ES traded down to 4486.25 on Globex and opened Wednesday’s regular session at 4493. After the open, the ES traded 4494.25 and then dropped down to 4469 at 10:30 as NVDA, AAPL, TSLA and big tech were all under selling pressure. After the low, the ES back-and-filled in a 4-point range and then sold off down to a new low at 4460.50 at 11:16, rallied up to 4469, and then dropped down to 4447 at 1:03.
From there, it rallied up to a 4461 double top at 1:41, pulled back a few points then ground its way up to 4471 at 3:27 as the early imbalance showed $63 million to buy. After the high, the ES sold back down to 4466.25 and traded back up to 4471 at 3:38. The ES traded 4469 as the 3:50 cash imbalance showed $1.538 billion to buy, rallied back up to 4473.25 and traded 4471 on the 4:00 cash close. After 4:00, the ES traded in a narrow range and settled at 4469.50 on the 5:00 futures close, down 30.75 points or 0.68% on the day.
In the end, Tuesday’s crappy close led to lower prices. In terms of the ES’s overall tone, it was weak as were the rest of the indices. In terms of the ES’s overall trade, volume was higher at 186k ES traded on Globex and 1.340 million traded on the day session for a total of 1.527 million contracts traded, its highest volume day since Friday Aug. 25th.
Technical Edge
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NYSE Breadth: 33% Upside Volume
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Nasdaq Breadth: 39% Upside Volume
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Advance/Decline: 37% Advance
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VIX: ~$15
ES
We have retraced about half of the recent rally. Keep an eye on yesterday’s low, as it can act as our pivot today.
ES Daily
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Pivot Area: 4447
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Upside Levels: 4470, 4490, 4510, 4526
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Downside levels: 4435-40, 4415, 4400-05
NQ
The NQ is below yesterday’s low of 15,310, with AAPL down almost 3% in pre-market trading. The NQ will play a huge role in how the market behaves today — whether good or bad.
NQ Daily
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Pivot: 15,310
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Upside Levels: 15,400, 15,460-70, 15,500-15, 15,575
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Downside levels: 15,200-210, 15,100
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 and look to re-establish lower (if we get it).
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XOM — Long from the monthly-up area at $108.50 — Trimmed ¼ at $112.50+ and ¼ at $115+. Break-even stop and can sniff for $119-$120 for next trim.
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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