Will Powell’s Presser Break the Trading Range?

Volatility remains low.

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Our View

There are a few things that tend to happen when the futures close weak. Two of those things are: They generally rally on Globex and a lot of times when the ES gaps lower after a weak close, they rally.

This is especially true on Mondays or early in the week when volumes are lower. What happened yesterday fell exactly in line with the PitBul’s rule about the ES tending to rally early in the day and early in the week.

My opinion is that the volumes tend to start out the week on lower volume and when you have shorts in the mix and the selling dries up, the ES ends up in a short-cover rally. I also know when I go with a straight “sell the rallies” approach without “buying the weakness,” my chances of being right fall considerably.

Yes, there were some good rips to sell, but the best trade of the day was buying the early pullback at the 4490 level. The second best was selling the rip when the futures rallied up to 4514.50. It was a narrow, low-volume chop.

Our Lean

See how this works? On the days I just go with “sell the rallies,” we see an early rally and then on the days I say “buy the weakness and sell the rallies,” the ES goes straight up.

Today is day one of the Fed’s two-day meeting. What we know is there is a 99% probability that the Fed will leave rates unchanged, but what we don’t know is what Fed chair Powell will say during the press conference tomorrow. That’s where the volatility tends to come from.

I can’t really see him saying anything real bullish. Maybe though, it will be enough to break us out of the current trading range.

That said, I expect today to be similar to yesterday.

If that’s the case, Our Lean is to sell the early rallies and buy the pullbacks. 4517-4520 should be the initial resistance and above there puts 4528, 4532, 4540 then 4550 on the table. On the downside, I’m looking for support at 4500, 4490, 4483, 4470-4465, 4450.

MiM and Daily Recap

ES Recap 15-min

The ES traded down to 4487 on Globex and opened Monday’s regular session at 4494.50. After the open, the ES rallied up to 4502.25, traded down to 4490 at 9:48, and then traded above the VWAP up to the 4402 area at 10:14. From there, it basically fell into a big back-and-fill pattern from the 4497 to 4503 area until 11:16 when the ES finally broke out and made four separate new highs: 4510.00 at 11:36, 4512.50 at 11:46, 4512.75 at 12:06 and 4514.50 at 12:43.

After that last high, the ES started down-ticking and pulled back to 4504.75 at 2:43, traded 4508.25 at 2:40 and dropped down to 4496 at 2:56, then traded back up to 4502 at 3:17. The ES sold back down to a 4496.25 double bottom at 3:49 and traded 4497.50 as the 3:50 cash imbalance showed $1.25 billion to sell and traded 4501.50 on the 4:00 cash close. After 4:00, the ES traded up to 4504 and settled at 4502.50 on the 5:00 cash close, up 3.50 points or +0.08% on the day.

In the end, it was simple. The ES tends to rally early in the day and early in the week. In terms of the ES’s overall tone, it was a two-way trade — rally early and selloff late. In terms of the ES’s overall trade, volume was low: 272k traded on Globex and 910k traded on the day session for a total of 1.113 million contracts traded.

Technical Edge

NYSE Breadth: 32% Upside Volume
Nasdaq Breadth: 42% Upside Volume
Advance/Decline: 45% Advance
VIX: ~$14.50

ES

For now, the 4480s continues to hold as support, but the range has tightened considerably over the last few weeks.

ES Daily

Upside Levels: 4517-20, 4528, 4532, 4540, 4550
Downside levels: 4500, 4490, 4483, 4470-4465, 4450

CL

No one wants to hear it, but oil just keeps on chugging higher. My $94 target isn’t all that far off now.

Now into the $90s, my upside levels remain ~$94, ~$98 and ~$104. On a dip, see if the ~$88 area holds as support.

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.

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

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+. Now we have another ¼ peeled off at ~$118. If we see ~$120, can consider a final exit or hold for a longer-term swing. Up to you.
1. Break-even or better stops