Fry-Day Underway as S&P Rides in on a Hot Streak

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Our View

I started my trading career as a runner in the grain room. I was running bean, wheat and corn orders to the various pits. That by no means makes me a commodity expert, but I know enough to say that the most recent inflation readings don't seem to include oil at $77 bucks, nor oats, beans and other commodities that are pushing higher.

Some people think that the grains are going up because there are huge shorts, but that is not really the reason. Instead, grains are going up for two reasons.

First, (a commodity summary) “US Corn in Drought at 64%; US Soybeans in Drought at 57%; An Indian Rice Ban is a Big Deal; GFS Drier at Midday in the 6-10 Day Period.”

Second, when the dollar goes down, it loses value and it makes it cheaper to buy commodities. Helping this idea along, silver rallied and crude jumped to a recent high of $77.33. Look at the dollar index for more context:

On the one hand, this type of price action may suggest healthy economic demand — coupled with JPMorgan CEO Jamie Dimon’s comments that the “US Economy Continues To Be Resilient; Consumer Balance Sheets Remain Healthy” following the firm’s robust earnings beat.

While we’re glad the US economy seems to be doing well — and we’re pleased that we have an open swing trade in JPM — higher commodity prices ultimately spell higher food and energy costs. While the CPI and PPI print were “wins” for the bulls, there is a certain stickiness to inflation that seems like it will be hard to beat.

Our Lean

The ES is going for its fifth straight daily gain and is up in 8 of the last 12 sessions (while 2 of those 4 declines were less than 10 points).

The average decline of those four sessions? Just under 15 points. However, the average gain in the 8 rally days was almost double that, at 29.1 points.

My point is pretty simple: The bulls continue to buy the dip and ram the S&P 500 higher.

Its options FRY-day and the banks kick off earnings. Yesterday, Delta talked about how travel demand remains robust. We already noted JPM’s results and comments, but WFC also delivered a top- and bottom-line beat.

Our Lean: Sell the early rallies and buy the pullbacks keeping in mind how far the futures have rallied over the last two weeks and that the ES is up against good resistance at the 4550-4565 area. I will be looking at a long at the 4521-4517 level. Below that and the 4493-4503 area should be strong support.

MiM and Daily Recap

The ES traded up to 4527 after the PPI number showed wholesale prices rose a meek 0.1% in May and traded 4526 on Thursday’s 9:30 futures open. After the open, the ES traded down to 4521.25 and rallied up to 4531.75 at 9:40. Sometimes the markets move and sometimes they don't. After a small pullback, the ES rallied up to 4532.25 at 9:55 and until 11:09 the ES back-and-filled above the VWAP, traded 4552.75 at 11:37 and then jumped up to four separate new highs: 4534.25 at 12:10, 4536.50 at 12:35, 4540.25 at 2:19 and 4543 at 3:11. It was up 0.74%, while the NQ made a new high at 15,71.25 at 3:17, up a whopping 1.46%.

At 2:15 someone from the chat (manny) posted: NVDA - highs, TSLA V bounce, GOOG rally, MSFT, APPL, META all stuck.

After the highs, the ES pulled back to the 4534.75 area and bounced back to 4546.50, pulled back down to the 4541.25 level at 3:21 and rallied up to a new high by 1 tick at 4150.50 at 3:47. The ES traded 4547.50 as the 3:50 cash imbalance showed $1.267 to buy, traded down to 4538 and traded 4542.75 on the 4:00 cash close. After 4:00, the ES traded in a narrow range and settled at 4539.50 on the 5:00 futures close, up 36 points or 0.80% the day.

I put these post in the room before the cash close when the ES was making its high:

• IMPRO: Dboy :(2:22:10 PM) : Im offering my es long at 4546.50

• IMPRO: Dboy :(3:12:44 PM) : es offer up to 4549.00

• IMPRO: Dboy :(3:42:17 PM) : sold 1 es at 4549.00

• IMPRO: Dboy :(3:43:36 PM) : probably wrong but this is getting frosty

• IMPRO: Dboy :(3:48:29 PM) : lots of two way flow going into the close

• IMPRO: Dboy :(3:48:42 PM) : possible profit taking

• IMPRO: Dboy :(3:49:05 PM) : as the rats jump ship

In the end there was a big rotation: buy Nasdaq / Sell Dow. In terms of the ES’s overall tone, it was firm but the NQ was way firmer. In terms of the ES’s overall trade, volume was low as 227k contracts traded in Globex and 878k traded in the day session for a grand total of 1.10 million futures traded, the lowest total since May 9 (excluding the short-session on July 3).

Technical Edge

• NYSE Breadth: 71% Upside Volume

• Advance/Decline: 67% Advance

• VIX: ~$13.50

I have to say, I am quite pleased with our open swings. DOCN is booming and the ARKK breakout is in full swing. We were a day early on TLT, but it’s been a workhorse and now we are roughly +$10 on JPM.

Again, remember how far the S&P has gone in a short period of time. Protect profits, inch up stops and manage open positions with a calm, cool demeanor!

SPY

Riding a hot streak, bulls have to have $451.75 circled on their charts. That’s the 161.8% upside extension from the larger, current range and the 78.6% retracement of the bear market decline.

• Upside Levels: $450.38, $451.75

• Downside Levels: $447.50, $448.50 (minor), $444

S&P 500 — ES Futures

Below we have the daily chart on the left and the 15-min chart on the right.

The daily shows the ES pushing its recent range’s 161.8% extension, with the larger current range’s 161.8% up at ~4571. It also highlights how attractive a dip to the 4493 to 4503 area would be.

If we zoom in to the 15-min chart, keep an eye on that ~4543 area, which was clear resistance during Globex. A dip to that area could draw in the buyers.

• Upside Levels: 4551, 4571

• Downside levels: 4543, 4518-20, 4493-4503

SPX

• Upside Levels: 4517-23, 4535

• Downside Levels: 4489, 4466, 4450-55

NQ

All prior upside levels achieved, except 15,855. Daily Chart + 30-min chart:

• Upside Levels: 15,740 (30-min chart highlights this well). However, some hesitancy to go “daily-up” overnight — noted. 15,855

• Downside Levels: 15,685, 15,400-440, 15,300-325

QQQ

If the Qs go daily-up over $380 and hold above that level, then $382.50 is in play. Otherwise, you know the drill. We are hyper-focused on a potential dip to the $370-72.50 zone.

• Upside Levels: $380, $382.50

• Downside Levels: $375.50, $370-72.50

Open Positions

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

1. DOCN — Long from $38.25 — Small trim at $39.75 to $40 and a second trim above $40.75. Trimmed more between $45 and $47 and down to ⅓ at $49.50+

   1. Should have us down to a ⅓ position. We’re +28% from entry. Good job!

2. JPM — Retested the breakout zone and long. This is a longer term swing, but can consider trimming

   1. Many are long from $143-145. I would consider a trim if we trade $153+ (doing so in the pre-market now), although I’d prefer $155+

      1. Down to ½ if we see $157 to $157.50+

3. TLT — gap-filled at $99.65 — got our first trim at 100.75+ and second trim between $101.50 and $102.

   1. Beautiful! ⅓ to ½ position now vs. a Break-even stop. Can consider exiting more here just to pay ourselves for the risk taken. Otherwise, look for $102.70 to $103 to get down to runners.

4. ARKK — Long from ~$46 — “something close to $50” ended up within two dimes of that level. Warranted a small trim, ~¼ to ⅓.

   1. Ultimately, this will be a dip-buying name.

5. HSY — nice doji close in the zone — Longer-term swing. Daily-up over $243.15 could be the entry as well.

Go-To Watchlist

Feel free to build your own trades off these relative strength leaders

Relative strength leaders → (List is growing long!)

1. Growth stocks ARKK — DKNG, DOCNs, UPST, SHOP

2. LLY, CAH

3. AI stocks — NVDA, AMD, AVGO, ADBE, SMCI

4. Mega cap tech — MSFT, AAPL, META, CRM

5. Select retail — CMG, ELF, LULU

6. Homebuilders ITB — TOL, KBH, DHI

7. BRK.B

8. ABEV, DXCM

9. Cruise stocks — RCL, CCL, NCLH

10. DAL, DT, AMAT

Relative weakness leaders → m

1. CF, MOS

2. PFE (all vaccine gains now gone)

3. EL, FL, DG

Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!