New Buyers or Just a Dead-Cat Bounce?

Is the rebound legit?

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Our View

After a vicious three-week selloff that ended with 6 down days in a row, the ES has bounced 150 points from its lows on Friday. It's a simple question: Have the S&P and Nasdaq made a low? 

Remember, I'm always bull and looking for lows but not everyone agrees. JPMorgan's chief market strategist Marko Kolanovic wrote in a note on Monday:

“Price action may depend on earnings and could stabilize near-term, but beyond this, however, we think the sell-off has further to go. We remain concerned about continued complacency in equity valuations, inflation staying too hot, further Fed repricing, and a profit outlook where the implied acceleration this year might end up too optimistic." 

Kolanovic went on to say that "The current market narrative and patterns are increasingly resembling those of last summer, when upside inflation surprises and hawkish Fed revisions drove a correction in risk assets, but investor positioning now appears more elevated."  

I agree with part of this, but we all knew the Fed was wrong when they forecasted 3 rate cuts in 2024 and yes the markets got spooked as the public became increasingly pessimistic about the Fed cutting rates at the end of the summer in 2023. But I think the difference is it's an election year and the government is going to do everything it can to keep the stock market rolling — but that doesn't mean they won't be volatile.

Our Lean — Danny’s Trade

This is Danny Riley’s personal trading plan for the day.

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MiM and Daily Recap

ES Recap

The ES traded up to 5069.00 and traded 5069.50 on the regular session open. After the open, the ES 5070.75, pulled back to the 5063.75 level at 10:00, pulled back to 5078.50, and rallied up to a new high at 5096.00 at 10:30. After the high, the ES dropped a few points and then rallied up to another new high at 5105.50 at 11:00 and then pulled back to the 5092.25 level at 11:30, made a lower high at 5102.25 and rallied up to a new high at 5106.75, made another new high at 5108.00 and pulled back to 5101.25 at 1:00. 

After the pullback, the ES rallied up to a new high at 5112.75 at 2:00 and pulled back to the 5106.75 level at 2:30 and then double topped at the 5112.75 at 3:00. From there, the ES pulled back to 5101.50 at 3:30 and then rallied up to a lower high at 5108.75 at 3:47 and traded 5106.50 as the 3:50 cash imbalance showed ~$400 million to sell and traded 5107.75 on the 4:00 cash close. After 4:00, TSLA shares ripped higher despite a top- and bottom-line miss and the ES rallied up to 5113.50 and settled at 5112.25, up 63.25 points or +1.25%, the NQ settled at 17,656.00, up 316 points or +1.82%, brent crude oil rose to close at $88.42 a barrel — off its recent high of $91.17 hit earlier this month — and the 10-year note yield fell to 4.597%, from 4.622% Monday.   

In the end, we had Mutual Fund Monday followed by Turnaround-Tuesday yesterday. In terms of the ES's overall tone, it was firm but I'm trying to figure out how much of the rally is new buying versus short covering. In terms of the ES's overall trade, volume was lower: only 207k traded on Globex and 1.1 million traded on the day session for a total of 1.208 million contracts traded.

Technical Edge

  • NYSE Breadth: 80% Upside Volume (!)

  • Nasdaq Breadth: 70% Upside Volume

  • Advance/Decline: 82% Advance (!)

  • VIX: ~15.75

S&P 500 — ES Futures

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Guest Post — Polaris Trading

Prior Session was Cycle Day 2Cycle rally continuation was this session’s trading theme as price surpassed 3 Day Cycle Target (5078), extending upwards to Statistical Deviation Levels (5102 – 5112).  Range was 75 handles on 1.297M contracts exchanged.

***NOTE: IF you want to learn more about how the 3-day cycle levels are derived, THEN check out the FREE TRIAL offer below. Cycle Analysis is an integral part of the PTG Methodology.

 …Transition from Cycle Day 2 to Cycle Day 3

This leads us into Cycle Day 3: Price closed near the upper edge of CD2’s range with bulls in dominant control. 3 Day Cycle Targets have been surpassed…Hence we’ll mark today’s session as a “wild-card”, meaning further upside potential exists, though the next decline could begin at any time. 

As always, our tactical trade plan remains unchanged…Stay in alignment with dominant intra-day forces. As such, scenarios to consider for today’s trading.

Bull Scenario: Price sustains a bid above 5100, initially targets 5125 – 5130 zone. 

Bear Scenario: Price sustains an offer below 5100, initially targets 5085 – 5080 zone.

PVA High Edge = 5112       PVA Low Edge = 5085         Prior POC = 5106

*****The 3 Day Cycle has a 90% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history. 

Thanks for viewing…PTGDavid

Economic Calendar

For a more complete Economic Calendar see:

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!

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