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- Fed Rate-Hikes Loom Over Stocks
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Our View
The one thing haunting the S&P and Nasdaq right now? The Fed.
During the Minutes, the Fed reiterated its stance, which is that rates are going higher and bonds are getting whacked again. That leaves us with a trade setup in TLT and a note on the /ZB futures and 10-year yields, but we’ll drop those below in the technical section.
Market participants find themselves in an impossibly difficult situation: Don’t fight the Fed or don’t fight the trend?
While the Fed is closer to the end of its rate-hiking spree than the beginning, doesn’t mean the market is prepared. As Powell & Co. reiterate their calls for “higher for longer,” the market had been — until very recently — calling the Fed’s bluff and pricing in rate cuts by year-end.
Even though the stock market continues to barrel higher and the seasonality stats remain strong, the bond market has taken notice and started to price in higher rates.
Our Lean — The PitBull’s Take
This is Danny Riley’s personal trading plan for the day.
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MiM and Daily Recap
The ES traded down to 4466.25 on Globex and opened Wednesday's regular session at 4471.25. After the open, the ES shot up to 4490.75 at 10:38, then dropped 7.25 points down to 4483.50. From there, the ES rallied back up to a new high at 4491.25, dropped down to 4479.25 at 12:40, then fell almost 10 points down to 4488.25 at 2:04. After a pop to 4488, the ES quickly dropped down to 4475 and then snap-back rallied up to 4490 at 3:23.
The ES pulled back to 4485 ahead of the 3:50 cash imbalance, traded 4488 when $263 was shown to be for sale, then fell and traded 4483.25 on the 4:00 cash close. After 4:00, the ES sold off down to 4481.75 and settled at 4482 on the 5:00 futures close, down 8.5 points or -0.19% on the day.
In the end, it was a gap down open, rip higher and chop. In terms of the ES's overall tone, it was firm. In terms of the ES's overall trade, 188k ES traded on Globex and 856k traded on the day session for a total of 1.13 million contracts traded, the lowest full-day trading volume in about two months, (since early May).
Technical Edge
NYSE Breadth: 38% Upside Volume
Advance/Decline: 29% Advance
VIX: ~$14.75
SPY
Bid right off the open yesterday, as SPY continues to hold this week’s $441 low. There’s more selling pressure this morning, so let’s keep an eye on that mark this morning.
Below $441 and the $438.28 gap may need to be filled.
Pivot: $441
Upside Levels: $442, ~$444
Downside Levels: ~$438, $436
S&P 500 — ES Futures
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Go-To Watchlist
Feel free to build your own trades off these relative strength leaders
Relative strength leaders → (List is growing long!)
Growth stocks ARKK — DOCN, SOFI, UPST, SHOP
LLY, CAH
AI stocks — NVDA, AMD, AVGO, ADBE, SMCI
Mega cap tech — MSFT, AAPL, META, CRM
Select retail — CMG, ELF, LULU
Homebuilders ITB — TOL, KBH, DHI
BRK.B
ABEV, DXCM (nice breakouts)
Cruise stocks — RCL, CCL, NCLH
DAL, DT, AMAT
Relative weakness leaders →
PYPL
MET
CF, MOS
PFE
EL, FL, DG
Economic Calendar
