Volumes Stall as We Await This Week’s Events

CPI is on tap tomorrow.

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Our View

I forgot to add the PitBull’s rule about the ES rallying early in the week and early in the day to the Lean. That said, the Lean was right on yesterday. It’s also worth mentioning that “rolling” is adding a lot of volume to the futures right now, so keep that in mind.

I know…it’s the end of the summer and back to school and all that, but the NYSE volume has been low for months and I think it has a lot to do with people lowering their stock market exposure. Uncertainty in the markets and certainty in short-term Treasuries and high-yield savings accounts is making for an easy decision right now among investors.

PitBull said something about dark pool volumes, but I don’t think that is the main reason for the volume being so low. I read something that said $17 billion a month goes into interest-rate products. Total estimated outflows from long-term mutual funds were $12.92 billion for the week ended Wednesday, August 30.

That money has to go somewhere right?

Remember: We have CPI on Wednesday, Retail Sales/PPI on Thursday and Triple Witching expiration on Friday.

Our Lean

From our friend Rich Miller, AKA @HandelStats

This study is for the day before the CPI report for September (released on Wednesday morning). The study shows the ES being up 12, down 3 for the last 15 occasions (or an 80% win ratio). The three losing days were during the 2008 credit crisis, down fractionally in 2018, and in 2020 during the Covid-19 pandemic.

Handelstats data

Our Lean: is similar to yesterday.

We are looking for higher prices and would look to buy the early weakness (especially if the ES gaps lower) and buy the pullbacks. Support comes in at the 4520 and 4490-93 areas. On the upside, my levels are 4533-45, 4551-53, 4564, and 4575.

MiM and Daily Recap

ES 15-min recap

The ES traded up to 4538.75 on Globex at 9:14 a.m. and opened Monday’s regular session 4537.25. After the open, the ES rallied up to 4443.50 at 9:35, traded back down to 4519.50 at 11:05 and then ground higher for the next two hours, hitting a high of 4537.75. From there, it pulled back down to 4530.75, rallied up to a lower high at 4540 at 1:45, dropped a few points, then rallied up to 4540.50 at 2:43.

The ES pulled back a few points and then rallied up to 4542 at 3:28 as the early imbalance showed $70 million to buy. The ES dipped 4537 level and traded 4538 as the 3:50 cash imbalance showed $9 million to buy before trading 4540 on the 4:00 cash close. After 4:00, the ES drifted lower and settled at 4537.50 on the 5:00 futures close, up 28.50 points or +0.64% on the day. The NQ, Nasdaq futures close up 180.50 points or +1.16%.

In the end, the ES rallied on Globex, rallied after the open, pulled back, and rallied again. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was very low, only 159k traded on Globex, and 759k traded on the day session for a total of 918k contracts traded. Other than on a holiday, the ES volume was by far the lowest I have seen all year.

Technical Edge

NYSE Breadth: 61% Upside Volume
Nasdaq Breadth: 66% Upside Volume
Advance/Decline: 54% Advance
VIX: ~$14

ES — December Contracts

4484 is last week’s low and the 61.8% retrace of the recent rally. That needs to hold for bulls to keep conviction.

Support comes in at the 4520 and 4490-93 areas. On the upside 4533-45, 4551-53, 4564, and 4575.

ES Daily

Upside Levels: 4533-45, 4551-53, 4564, 4575
Downside levels: 4520, 4490-93, 4484

CL — Crude Oil

Support possible in the mid-$80s ($84-$85), but not slowing down one bit. Can we see $90?

CL Daily

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.

JPM — Many are long from $143-145. This is a longer term swing. Trimmed $153s, then $157.50+ on 7/24.
1. Down to ½ position vs. Break-even stop. Can make small, ~10% position trim if we see $160+
2. If worried about a larger correction, can sell/trim north of $150 and look to re-establish lower (if we get it).
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.