Hike or Hold?

Not A Pretty Picture

I want to point something out... you know my old saying about if you want to know where the S&P is going, you follow the money?

Well, as you can see, January had the largest inflows of the year and has shrunk every month into July, but things went south in August and September.

For the week ending Sept. 9, 2026, investors pulled about $32.27 billion out of U.S. equity funds, the biggest weekly outflow in roughly nine months. Large-cap funds took the biggest hit, with about $40.44 billion in outflows. Technology funds still attracted about $1.71 billion, and small-cap funds had modest inflows.

Globally, equity funds saw about $15.52 billion in net outflows, while money moved toward bonds and other defensive areas as oil prices, inflation fears, and Fed-rate concerns increased.

Our View

I received a few emails from a subscriber, Ron, complaining about how I left out adding the rollover into the OP. I didn’t forget, as I wrote about it Wednesday night for Thursday’s OP, where I laid out all of this week’s main topics.

Just so everyone understands, the S&P roll is mainly used by institutional players, banks, hedge and pension funds, and prop firms. It used to take a month and a half to do, and when it was manually executed, like many things in the ES, it was tied to fair value and interest rates.

The old thinking is that officially it starts on the Thursday before the quadruple witching, but in reality, if you wanted to trade the nearby month, you could roll anytime you want. A few years ago, the CME moved the roll day, or “switch” day, to the Monday of the week of Friday’s expiration.

Yes, we had 50k spreads trade last Wednesday, and volume picked up on Friday, but now the roll lasts from Monday to Friday morning before the opening bell. Like everything else, it is automated.

I have known for years that when traders move from the expiring ES contract into the next quarterly contract, volume and open interest shift quickly. During that transition, you can see wider spreads, thinner depth in the old contract, heavier algorithmic activity, and more noise around fair value.

The spread between the old and new contracts is driven mainly by interest rates, dividends, and time to expiration, so the new contract may trade at a premium or discount without implying a directional view on the S&P 500. Most importantly, intraday levels can become less reliable on the expiring contract as liquidity drains.

But in the world we live in, with the short duration of the roll and the volume shifting so quickly, once the volume shifts to the dominant contract, it becomes less of an event. When you consider all the headlines and news that hit the markets on a daily basis, on a scale of 1 to 10, the roll is just a small blip on a big screen.

We are going to call this week Hike or Hold.

There are 11 economic reports this week, but no releases today. 98.4% of the S&P has reported Q2 earnings, and the remaining names are mostly smaller or off-cycle reporters rather than the mega-cap companies that drive the index.

This week, focus will revolve around the beginning of the rollover and the Fed’s 2-day meeting Tuesday and Wednesday. The Fed meeting will be unusually important because there is going to be a high level of debate over whether the Fed will hold rates steady or actually hike 25 basis points.

Right now, the Fed funds target is 3.50%–3.75%. A Reuters poll still had a majority of economists expecting no change, but after stronger inflation data and the jump in oil prices, markets had moved toward roughly a 70% probability of a 25 bp hike.

According to JPMorgan's chief economist Michael Feroli: “Simple core PCE inflation has been above 3% every month this year and has made little recent progress at heading toward 2%.” Meaning the inflation is too hot and not making progress, and pushing up bets that the Fed will hike is Warsh himself, who took a much more forceful approach at his first Jackson Hole symposium.

As I have said, I don’t think the Fed will raise the rate in this meeting, but it clearly looks like it’s coming.

Spooky Week Ahead

According to the Stock Trader's Almanac, historically, September quad-witching week has had a slightly bullish long-term bias for the S&P 500, with the index rising roughly three times for every two declines since 1990, but the more recent record has been much weaker.

The actual September quad-witching Friday has developed a distinctly bearish bias, with the S&P 500 falling in 12 of the prior 13 September witching Fridays through 2025. The bigger seasonal warning, however, comes after expiration, as the week following September quad witching has historically been one of the weakest weeks of the year, with the S&P 500 down in 27 of the previous 35 years and posting an average decline of about 1.05%.

For the ES, that means quad-witching week itself is historically slightly bullish but less reliable in recent years, witching Friday carries a bearish recent bias, and the week after expiration has the strongest bearish seasonal tendency. For 2026, the Fed meeting occurring during the same week could easily overwhelm the normal expiration-week seasonal pattern.

Our Lean

I don’t think any deal with Iran is coming, but Oman is actively mediating a planned meeting for Monday in Oman involving Iran and Gulf states, focused heavily on the Strait of Hormuz and regional security, while at the same time, Pakistan conveyed a Saudi warning to Iran, urging Tehran to rein in the Houthis after major Houthi missile and drone attacks hit Saudi territory and energy infrastructure.

Also, if the attacks expand further into Saudi Arabia, its defense commitments with Saudi Arabia could become more important. Pakistan has a collective-defense agreement with Saudi Arabia and Turkey. Under the pact, an armed attack on one member can be treated as an attack on all three.

It’s going to be a big week of headlines and ups and downs. Crude oil finally broke an 8-day rally on Friday, closing down 2.37%, but the bonds closed down for their 4th session in a row. Crude oil is up 2.5% Sunday night, and diesel fuel made a high at 6.3744 after Trump warned Ukrainian President Zelensky to stop knocking out diesel fuel in Russia.

I don’t think the trading picture is very clear, but I do think it’s possible we will see some headlines out of the Oman meeting, which Iran has already played down as its economy is falling off a cliff, and while it may try to keep the war going until the midterm, I think there is a lot of pressure from all sides to reach a ceasefire.

Our lean: I have to stick to my guns, the markets can rally, but I don’t think they can hold, but according to the Stock Trader's Almanac, the week of the quad witching has a slightly bullish bias. I cannot rule out buying a big gap down or some early weakness under the gap down, but I still think the money trade is selling the rips.

Key levels: 7650 on the downside; 7727 and 7750 are key on the upside. This is going to be a big week for the old saying... trade less and pick your spots better.

I am going to end this by saying I came up with all the ideas in the OP. I didn’t take it from anywhere, but I couldn’t do all the research without AI. I hope you like what I am doing, and if you have any questions or want to critique me, please do. My email is [email protected].

Thank you.

$ES AI Market Profile Levels

MOC Recap: Heavy Nasdaq Sell Program Reverses Into the Close

The MOC opened with $2.94 billion to sell, with $5.88 billion in sell orders against $2.94 billion to buy. The all-market dollar lean dropped to -66.7%, crossing the threshold that signals a more wholesale sell program, while the -54.1% symbol lean showed the selling was still somewhat concentrated.

The Nasdaq was clearly the center of the pressure. Its $2.79 billion sell imbalance carried an -80.1% dollar lean and -76.0% symbol lean, indicating broad, wholesale selling. The S&P 500 was also heavily offered at $3.01 billion to sell with a -68.8% dollar lean. In contrast, the NYSE was much more rotational, with dollar and symbol leans near -52% and -50%.

Technology and communication services drove the selling. Communication Services posted a -92.4% dollar lean and -75.0% symbol lean, while Information Technology registered -75.5%. Consumer Discretionary (-80.1%), Utilities (-78.6%), Energy (-73.9%), and Materials (-69.2%) also showed strong sell-side pressure. Consumer Staples stood out on the buy side at +$271 million, although its -57.8% symbol lean showed that buying was concentrated rather than broad.

Among individual names, the largest sell imbalances included AAPL, NVDA, MSFT, AMZN, GOOGL, LLY, GOOG, TSLA, AVGO, WDC, and AMD. Buy-side leadership came from KHC, SNOW, JCI, UNH, DELL, APH, NXPI, TMO, DIS, and EOG.

The key story was the transition. The $2.94 billion sell imbalance steadily faded, flipped to $1.05 billion to buy by 3:55, reached $1.12 billion to buy at 3:59, and finished near $707 million to buy at 4:00. The close ultimately became a sharp reversal from an aggressive Nasdaq-led sell program into late buy-side demand.

How to read the MIM

How the NYSE and Nasdaq Auctions Work
How the NYSE and Nasdaq Auctions Work

BTS Levels - (Premium Only)

Today’s Important Economic Events
3,6 month bill action at 11:30 am

No SP500 companies with earnings announcements today.

Polaris Trading Group Summary Friday, September 11, 2026

Friday began as a strong Cycle Day 2 directional session, with the market respecting the planned Line in the Sand and fulfilling multiple upside objectives before transitioning into more rotational, range-bound trade later in the morning. The room also observed the anniversary of 9/11 with scheduled moments of prayer, reflection, and shared personal memories.

Market Roadmap

• The session opened with 7600 identified as the Cycle Day 2 Line in the Sand.

• Overnight price action respected 7600 and rallied to fulfill the 7645 upside target from the Daily Trade Strategy.

• David identified the next upside objectives as:

  • 7655, the 3D Central Pivot

  • 7665, the upper range edge

• A sustained move above the prior high would signal further range expansion.

• David’s Prime Directive was to stay aligned with the dominant force and take only AAA setups.

Strong Early Rally

• The bullish force remained firmly in control during the early session.

• The 7665 range target was fulfilled.

• Price continued higher, producing approximately 63 unanswered points during the rally swing.

• The 7677.25 D-Level came into play.

• The Cycle Day 2 upper penetration target at 7682 was ultimately fulfilled.

• The morning provided a strong example of the benefit of staying aligned with directional momentum rather than attempting to fade an extended move too early.

Positive Trades

• Slatitude39 reported catching a BLT at 7672.50.

• Later, Slatitude39 shorted the ATR10 setup from 7668.25 for “lunch money.”

• A D-Level short from 7677.25 was also reported and appeared to develop favorably.

• Bruce F reported going 2-for-2 on the DLMB setups.

• Traders noted that the ATR7 and ATR10 setups performed particularly well during the session.

• These trades highlighted the value of waiting for defined setups and locations rather than chasing price.

Changing Market Conditions

• David later established 7666 as the new D-LIS.

• After the market consolidated above the prior high, David warned that a violation below 7665 could open the “trap door” for a larger move lower.

• Traders began identifying signs that the market was becoming more range-bound.

• Frequent ATR4 flips were specifically noted as a clue that directional conviction was weakening.

• The discussion reinforced that ATR setups remain valid in all sessions, but they should only be taken when they fit the trader’s individual plan and current market structure.

Lessons Learned

• Stay aligned with the dominant force while directional momentum remains intact.

• Do not assume an extended move must immediately reverse simply because it has traveled a long distance.

• Recognize when the market shifts from directional expansion into rotational or range-bound conditions.

• Frequent indicator flips and weaker continuation are important clues that conditions are changing.

• A valid setup is not automatically a required trade; it still needs to fit the trader’s plan.

• Patience and selectivity remain essential, particularly when the market begins to lose directional clarity.

9/11 Remembrance

• David paused the room at key moments corresponding with the September 11 timeline.

• The room observed moments of prayer and reflection throughout the morning.

• Several members shared personal memories and experiences from September 11, 2001.

• The remembrance gave the session a reflective tone and provided perspective beyond the trading activity itself.

Day in Review

• The session began with excellent directional alignment and fulfilled the planned 7645, 7665, and 7682 upside objectives.

• Traders who stayed with the bullish force or patiently waited for defined D-Level and ATR opportunities found quality setups.

• As conditions became more rotational, the emphasis shifted toward selectivity and adapting expectations.

• The central lesson was to trade the market condition that actually exists rather than the condition a trader hopes to see.