It's Jobs Day and FRY-Day

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Our View

Remember when they re-weighted the Nasdaq due to a handful of stocks making up 30% of its market cap? Here is the Goldman Sachs interview outlining the reasoning of the Nasdaq rebalance. Even if you already know about the Nasdaq rebalance, this lays everything out. 

What it was supposed to do was lower the concentration of the market leaders through a special rebalance — which it did — but according to Charlie Bilello, MSFT/NVDA/AAPL are now >20% of SPX, and its highest concentration on record by a good amount...the highest pre-2019 was the early 80s when IBM/T/XOM were 13.4%. 

Today NVDA's market cap is over $3 trillion and literally moves the Nasdaq futures up and down. I pay close attention to NVDA when I trade the NQ futures, especially if the futures open lower and the stock is getting bid up. The bottom line is, the same 7 stocks continue to dominate the tape and while some of them are not as magnificent they still make up for a large percentage of the index and that doesn't look like it's going to change anytime soon.

Our Lean

I was right about my rule that says, “the ES and NQ tend to go sideways to lower after a big rally.” Helping that idea was the tech rebalancing lasted until 2:30. That said, no harm, no foul as the ES closed near unchanged and the NQ closed modestly lower. 

So where are we? My guess is if the ES opens lower on Globex volume of 300k+ I'm adding to my long position and will try to hold it all day. Should the ES gap higher, I'm sticking with my long and will be looking to add on any 25 to 40 point pullbacks. 

The May jobs report is expected to show further signs of cooling in the labor market. According to consensus estimates compiled by Bloomberg, nonfarm payrolls are expected to rise by 185,000 in May while the unemployment rate remained flat at 3.9% from the previous month. 

If the ES and NQ do start going up, 5380 is a big area. Above there I have 5412, 5420, and 5430. Don't forget we have CPI, PPI, and the Fed next week. 

MrTopStep Levels:

MiM and Daily Recap 

The ES traded up to 5372.75 and opened Thursday's regular session at 5369.25. After the open, the ES down-ticked to 5363.75 and rallied up to 5370.00, pulled back to 5365.50 at 9:34, pulled back to 5366.50 and then traded up to the early high at 5373.25 at 9:46. After the high, the ES sold back off down to a new low at 5362.25 at 10:00 and then rallied up to a lower high at 5371.00 at 10:26. After the pop, the ES made a sequence of lower bars and pushed the ES down to a new low at 5361.00 at 11:04 and then rallied back up to 5366.75 and that up-stick was another lower high and the ES sold off down to the low of the day at 5351.25 at 1:50.

After the low, the ES rallied up to the 5360.50 level at 1:38, then traded down to 5358.50 at 1:50 and then some bids started showing up. The ES made one last push up to 5363.00 at 1:56 and then quickly broke down to the 5345.25 low at 1:10. The ES rallied up to 5365.75 at 3:12, sold off down to 5358.75 at 3:45 and rallied up to 5364.75, and then traded down to 5358.75 at 3:44. From there, the ES traded back up to 5365.25 and traded 5363.75 as the 3:50 cash imbalance showed $762 million to sell and traded 5365.00 on the 4:00 cash close.  

After 4:00, the ES traded in a narrow range and settled at 5363.25 on the 5:00 futures close, down 2.5 points or -0.05%. The NQ settled at 19,069.00, down 19.25 points or -0.10%, while oil prices rose, with Brent crude gaining 1.9% to $79.87 a barrel. The yield on the benchmark 10-yr note dropped for a sixth consecutive trading day to 4.280%, from 4.289% on Wednesday, and is on the longest stretch of declines since April 2023.

In the end, I noticed early that the NQ was not going up while the ES was being bid up after the open: 

• IMPRO : Dboy : (9:49:47 AM) : some weird NQ price action

• IMPRO : Dboy : (9:50:47 AM) : It would be a good thing if the ES and NQ would pull back. 

In terms of the ES's overall tone, it didn't present any real weakness. In terms of the ES's overall trade, volume was lower: 170k traded on Globex and 1.024 million traded on the day session for a total of 1.194 million contracts traded. 

Technical Edge  

• NYSE Breadth: 52% Upside Volume

• Nasdaq Breadth: 54% Upside Volume 

• Advance/Decline: 46% Advance

• VIX: ~12.75

Guest Post — Spot Gamma

SpotGamma is one the the shining stars of the options markets. If you have never heard of them or already know of them and have never signed up for their options flow products or the SG Academy, I fully suggest you check them out and add them to your trader’s toolbox.

Here’s a snippet from them: 

Regarding structure, the VT did move up today (bullish action) and the Put Wall moved down (generally bearish), but a closer look at the Put Wall reveals that today’s Put Wall reading was on the noise level, as 5300 proportionally absorbed the most amount of total gamma.

This leaves 5300 as both primary and critical support, as SPX rests just above 5350. 

Economic Calendar

For a more complete Economic Calendar see: https://mrtopstep.com/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!