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(Free) The Market Simply Ignores the Macro Backdrop
There are a million problems out there, but the S&P 500 doesn't care.
Danny Riley
June 07, 2023
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Our View
What if we are 100% wrong about all the economic and the global macro picture? Higher rates don't matter, high inflation going higher, mortgage rates at 7%, commercial real estate meltdown, geopolitical issues that persist, inverted yield curves…the list goes on and on.
As the stock market rallies, investors feel good enough to sell some of their bonds and jump back into stocks. I have seen it many times — everyone gets too pessimistic, the VIX drops and the futures rally. That's kind of what is going on now.
On the one hand, I'm happy. I know I called for a lot lower prices this year and we did selloff, but now the ES is budding up against 4300 and the NQ recently traded up to ~14,695 up more than 3,800 points off its low. I’m a bull at heart and like seeing the markets go up and my friends and family make money.
Does this rally have to do with AI? Part of it does, but the US has a lot of really strong technology companies and right now that's what investors are betting on. In fact, it’s just a handful of them that are driving almost all of the gains.
Will AI cause a crash? My answer is, did it on Y2K? I don't see a 2000 tech bubble type selloff.
Our Lean
This is Danny Riley’s personal trading plan for the day.
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MiM and Daily Recap
The ES traded down to 4273.75 on Globex and opened Tuesday's regular session at 4275.50. The ES sold off right out of the gate, falling down to 4268.50 at 9:37 and rallied up to 4286 at 10:35. It pulled back 5 points, then rallied up to 4293.25 at 10:53. After the high, the ES sold off down to 4277.25, rallied back up to a new high by two ticks at 4293.75, and then dropped down to 4267 at 12:58, down about 25 handles. The ES rallied up to 4287.50 and then dropped down to a new low at 4274.50 at 2:36 and then rallied all the way up to 4291.50 at 3:35.
The ES traded 4291.25 as the 3:50 cash imbalance showed $1.77 billion to sell, climbed up to 4294.75 and traded 4289.75 on the 4:00 futures close. After 4:00, the ES held in the upper end of the trading range and settled at 4292.25, up 11.25 points or +0.2% on the day.
In the end, the weakness in AAPL was a drag on the ES. In terms of the ES's overall tone, thlloffs were being bought. In terms of the ES’s overall trade, total volume was 1.5 million contracts traded.
Technical Edge
NYSE Breadth: 72% Upside Volume
Advance/Decline: 66% Advance
VIX: ~$14
Not much has changed from yesterday. The action was mostly choppy as the S&P had a big move higher on Friday but no meaningful bearish news to bring it down. I would still love to see a retest of the 10-day moving average and prior resistance, but just because we “want” that, doesn’t mean we’ll get it!
SPY
Rejected right off the 61.8% retrace of the bear-market range at $429.61. Now we must wonder if — or really when — the SPY will fill the open gap down near $423.
SPY Daily
Upside Levels: $429.50 to $430
Downside Levels: $426.25, $425, $422.50 to $423
Yesterday we watched and waited for that 78.6% retrace + 10-ema combo on the 4-hour chart as a potential support area. Maybe we get it today?
The Trade Setup:
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Guest Post
Taylor 3 Day Cycle
Prior Session was Cycle Day 3 (CD3): Positive 3-Day Cycle as bulls continue to dominate the trading landscape within the current 4270 - 4300 range. Value has shifted higher, which suggests price acceptance at these levels. Yet another bullish development. Prior range was 26 handles on 1.482M contracts exchanged.
…Transition from Cycle Day 3 to Cycle Day 1
This leads us into Cycle Day 1 (CD1): Normal for CD1 is for some magnitude decline with the average measuring 4249 handle. With bulls in control and value shifting higher (acceptance), anticipation of probes higher to test upside response levels. Support shifts to 4280 (2-day value low) with potential to explore higher levels beyond the 4300 - 4305 zone. As such, scenarios to consider for today’s trading.
Bull Scenario: Price sustains a bid above 4290, initially targets 4315 – 4320 zone.
Bear Scenario: Price sustains an offer below 4280, initially targets 4265 – 4250 zone.
PVA High Edge = 4292 PVA Low Edge = 4280 Prior POC = 4290
*****The 3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.
For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:
Link to access full Cycle Spreadsheet > > Cycle Day 1 (CD1)
Thanks reading,
PTGDavid
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 and AMZN.
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