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Navigating the S&P as Win Streak Comes to an End
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Our View
After posting its longest winning streak since 2021, the S&P and Nasdaq finally gave up to the downside. Maybe the Fed had a little bit to do with the weakness, but when the auction results hit the tape, the NQ (Nasdaq futures) went straight offered and the bonds fell 3 full points on the day.
Let's face it, after a 275-point rally in 8 days, the selloff/decline should come as no surprise.
According to Dow Jones Market Data, since January 1928, the S&P 500 has logged winning streaks of nine days or more 32 times and the last streak of 10 days or more was the 12-day winning streak in September 1995. I think the takeaway is that it's OK to cheer the S&P and Nasdaq higher, but when winning streaks exceed 8 to 9 days, it tends to be a buyer-beware event.
Our Lean
How bad was yesterday's decline? It wasn't bad at all. That said, today is the week 2 FRYday options expiration. According to Goldman Sachs, money managers and CTA's have $143 billion in stock to buy by the end of the year.
With that in mind, Our Lean is for an early pop to sell. If the ES gaps higher, I’m a seller. If the ES gaps lower, I may look to buy, but ideally, I think — and so does the PitBull — that there is more room on the downside. PitBull said 4300. We shall see...
For those of you who like HandelStats levels, here they are:
Upside: Trade and hourly close above 4374 targets 4381.25. Hourly close above there targets 4388.51, then 4392.75 to 1 sd at 4394.79. Hourly close above there targets 4403.38, then 4406. Hourly close above there targets 2 sd at 4424.34.
Downside: Trade below 4372 targets settlement at 4365.25. Hourly close below there targets 4355.25. Hourly close below there targets -1 sd at 4335.71. Hourly close below 4332 targets 4326.75. Hourly close below there targets 4315.79, then -2 sd at 4306.16.
MiM and Daily Recap
ES recap 15-min
The ES did what it has done best lately. After a weak close, it rallied up to 4413.00 on Globex and traded 4409 on the regular session open. After the open, the ES traded down to 4394, bounced to 4406.25 at 10:00, then sold off down to 4388.75 at 10:09. From there, the drop led to a small chop before the ES dropped down to a 4385:25 double bottom at 10:40 and then rallied up to 4405.00 at 11:56, before dropping 29.75 points down to 4375.75 at 1:08.
After the low, the ES bounced up to 4391.75 at 1:15 and pulled back 6 points and fell into a choppy back-and-fill pattern until the ES traded up to the 4391 area at 1:38, then tumbled down to a new daily low at 4367.50 at 2:07, rallied up to 4376.50 and then dropped down to another new low at 4358.50 at 3:01. After that low, the ES fell into another narrow back-and-fill for the next 30 minutes and traded 4360.50 as the 3:50 cash imbalance showed $2.6 billion to buy, traded 4362.75 on the 4:00 cash close and settled at 4365.25 on the 5:00 futures close, down 28.75 points or -0.65% on the day.
In the end, it was just like the title of yesterday's OP said: “Winning Streaks Are Made to Be Broken.”
In terms of the ES’s overall tone, it was weak. In terms of the ES’s overall trade, volume picked up considerably: 201k ES traded on Globex and 1.692 million traded on the day session for a total of 1.893 million contracts traded.
Technical Edge
NYSE Breadth: 24% Upside Volume
Nasdaq Breadth: 32% Upside Volume
Advance/Decline: 25% Advance
Last week: Back-to-back 80/80 days for A/D and NYSE Breadth
VIX: ~15
ES
Levels from HandelStats.com
ES Daily
Upside: Trade and hourly close above 4374 targets 4381.25. Hourly close above there targets 4388.51, then 4392.75 to 1 sd at 4394.79. Hourly close above there targets 4403.38, then 4406. Hourly close above there targets 2 sd at 4424.34.
Downside: Trade below 4372 targets settlement at 4365.25. Hourly close below there targets 4355.25. Hourly close below there targets -1 sd at 4335.71. Hourly close below 4332 targets 4326.75. Hourly close below there targets 4315.79, then -2 sd at 4306.16.
NQ
NQ Daily
Upside: Trade and hourly close above 15287.27 targets 15310. Hourly close above there targets 15376.62, then 15384.50, then +1 sd at 15396.88. Hourly close above there targets 15435.50, hourly close above there targets 15477.77, then 15501, then 15535.77.
Downside: Trade below 15276.75 targets settlement 15258, then 15248. Hourly close below there targets 15223. Hourly close below there targets 15179.25. Hourly close below there targets -1 sd at 15119.12. Hourly close below there targets 15071.75. Hourly close below there targets -2 sd at 14980.23
Economic Calendar
Guest Feature
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 to your trader’s toolbox.
Here’s a snippet from them:
The market reaction to yesterday's events was muted due to supply of dealer gamma, which may have absorbed a lot of the selling. That positioning is shown in the SPY plot, with very large gamma bars staggered from 430 on up to 440 (and also SPX 4,300 to 4,400). Therefore, all that happened yesterday was an adjustment from the high end of our SPX range, to the middle. Supportive positioning should remain either in through Tuesday and/or while the SPY/SPX is > 430/4,300. We model tight daily trading ranges (SG 1 Day Implied Move), we do not think a break of 4,300 is in the cards for today.