‘Thin to Win’ Is Working in the Bulls’ Favor

DNC starts today

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Our View

This week starts out with only five economic reports and a boatload of Fed speak as all eyes will shift to the Jackson Hole Symposium. This week’s opening remarks come from Fed Governor Christopher Waller at 9:15 and end on Friday with Powell’s speech at 10:00 am ET.

Again, no hell or high water is going to stop Powell from lowering rates at least 2 times by the end of the year. As I have always said, I am not an economist but when Biden took office, a gallon of regular gas was under $1.60 a gallon. And food prices are still high and I think going higher in some places.

Our Lean

The ES did not exceed my 5% drop call by very much. The selloff was fast and sharp, but so was the move back up as the index is up 8.5% from this month’s low. My own opinion is the ES is overextended, but if the NQ holds up and the volume is light, we probably see higher prices. That said, I also don’t know how the markets will react to the Fed headlines.

I’m a buyer of any 30- to 50-point pullbacks. While I may sell some rips, the ES and NQ don’t seem to want to go down much. After all… it’s an election year!

As far as levels:

Support Resistance

5571 5601

5551 5607

5536 5615.50

5536 5621

5517 5631

5490-87.00 5641

5478 5648

5471 5664

MiM and Daily Recap

ES Recap

The ES sold off to 5536.50 on Globex at 8:55 AM and then traded up to 5568.50. After the open, the ES traded 5543.00, then moved up to 5559.50 at 10:49 AM. It pulled back to 5555.50, rallied to a new high of 5561.75, then pulled back to a higher low of 5558.75. It pulled back to another higher low before trading up to 5571.75. The ES then dropped 20 points to 5551.75 at 10:50 AM, rallied back up to 5563.75, and then sold off to 5555.00 at 11:21 AM.

After this pullback, there were a few small retracements, but the ES rallied to 5586.25 at 12:59 PM. It then pulled back to 5587.75 at 1:10 PM, rallied to 5583.50, dropped to 5579.00, rallied to 5584.75 at 1:45 PM, and then dropped to 5575.75. It rallied to 5579.50 at 2:21 PM, pulled back to 5575.25 at 2:25 PM, and rallied to 5580.75 at 3:00 PM before selling off to 5575.00 at 3:49 PM.

The ES traded at 5573.25 as the 3:50 cash imbalance showed $990 million to sell. It traded 5578.25 at the 4:00 cash close, then moved up to 5583.25 before selling off to 5576.75 at 4:22. The ES rallied to 5579.50 at 4:29, then sold off to 5576.00 at 4:31. It rallied to 5580.50 at 4:38, then sold off to 5571.25 at 3:49. The ES rallied back up, traded to 5579.00, and settled at 5580.25, up 2 points or +0.04%. The NQ settled at 19,604.00, down 1.75 points or -0.01% on the day.

In the end, it was a low-volume choppy mess. In terms of the ES’s overall tone, most of the selling pressure came from the NQ but overall they acted firm. In terms of the ES’s overall trade, I want to point out something: when the ES was going down two weeks ago on August 5th, total volume was 3.436 million contracts. But when the ES started going up, volume fell dramatically down to 1.067 mil on Friday. That is a 2.369 million contract swing from the high-volume day. Clearly, the term ‘thin to win’ is a big part of the rally.

Technical Edge

NYSE Breadth: 60% Upside Volume
Nasdaq Breadth: 70% Upside Volume
Advance/Decline: 64% Advance
VIX: ~15.50

DNC Begins

Protests at the Democratic Convention in Chicago, August 1968. From TIME

There are few that will argue that when it comes to Chicago, it is a political nightmare. “Defund the police” and “black lives matter” took to the street, and I had already predicted that when the weather warmed up after the covid-19 lockdowns, there would be riots and looting — and there was.

Chicago has a long history of marches and looting and starting this week, politics will be in focus yet again. That’s as the Democratic Convention starts today and is expecting 50,000 visitors — including 5,000 delegates and alternates — and runs through Thursday Aug. 22.

I have to ask…didn’t anyone tell the Democrats that the last time they held the convention in Chicago, in more than 48 hours of rioting, 11 Chicago citizens were dead, 48 wounded by police gunfire, 90 policemen injured, and 2,150 people arrested. Here is a story by TIME about the rioting and like back then, there was a lot of political change going on.

The convention is being held at the United Center and it looks like it’s totally locked down with walls put around it, but there are already protesters in the streets and they say there could be up to 100,000 protesters in the city coming in from all over and a huge Palestinian protest.