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We are running an End-of-Q2 and Fourth of July sale! If interested in going premium, note that we only run a few sales per year!
Our View
Today is quarter-end as we look to turn the page to Q3 and the second half of the year. The Nasdaq has dominated and the S&P has done well, up about 30% and 15% year to date, respectively.
The Dow and the Russell have been the clear laggards of the US indices, up just 2% and 6.8%. The latter is enjoying a five-day, 5% rally. Otherwise it sported a year-to-date gain of just ~3% a few days ago.
Will we see some sort of rotation out of the winners and into the losers? Based on the Russell’s performance, we’re already seeing some of that rotation, but it’s not clear how long it will last.
As per our Stock Trader’s Almanac (STA) note yesterday, the beginning of July tends to do well. That’s as the “first trading day of July has the Dow up 27 of the last 33 occasions and the ES up 29 of the last 33.” July tends to mark the best month of Q3, although August and September tend to be weak.
While STA is generally aimed at longer-term trends and themes, statistics like that can be helpful for us traders too.
Our Lean — Thin to Win
Seasonally, we remain positive going into today and into the first few days of the new quarter. The only question is, will there be any selling tied to the rebalancing? Lately, we’ve seen two main programs: “Sell Bonds/Buy the S&P” and “Sell Nasdaq/Buy Russell.”
Our Lean: Buy any 20+ point pullbacks. Also, use a bit of caution with this morning’s gap up (if we do indeed gap up) and keep that long bias in mind if we fill the gap and can hold that area as support.
One last thing to note: Trading volumes are likely headed lower. We could have a “thin to win” situation today, even with it being quarter-end. Next week though, lower trading volumes combined with seasonally strong statistics make “thin to win” a real likelihood.
Remember, the markets are only opened for a short session on Monday and are closed on Tuesday. How many funds and traders are taking the week off? Plenty.
As for levels, keep an eye on ~4455. Above this opens the door to 4464, then eventually ~4483. On the downside, I have support drawn in at 4425, 4416 and 4406 (courtesy of Polaris trading).
MiM and Daily Recap
The ES traded up to 4436.75 on Globex and opened Thursday's regular session at 4414. After the open, the ES sold off down to the session low at 4409.75, rallied up to 4424, back-and-filled for the next 15 minutes, and traded up to 4428 at 10:07. From there, the ES pulled back down to a higher low at 4414.50 and then rallied up to a lower high of 4427.25 at 10:23 and sold off down to 4413. By now you should already get the picture.
After the drop, the ES rallied back up to a new high at 4437.75 at 12:50, dropped below the VWAP down to 4423.50, rallied up to a 4432.25 double top and then sold off down to 4418 at 2:13. After a rally back up to 4428 at 2:40, the ES had a few small pullbacks and then traded back up to 4433.25 at 3:35 as the early MIM showed $550 million to sell. The ES sold back off down to 4425.75 at 3:45 and traded 4430.50 as the 3:50 cash imbalance showed $268 million to buy and then traded 4435.50 on the 4:00 cash close. After 4:00, the ES traded up to 4438 and settled at 4435.75 on the 5:00 futures close, up 18.25 points or 0.41% on the day.
In the end, the rotation for the day was buy ES / sell Bonds, Sell NQ buy RTY. In terms of the ESs' overall tone it was firm. In terms of the ESs overall trade, volume was steady at 1.4? million contracts traded.
Technical Edge
NYSE Breadth: 73% Upside Volume
Advance/Decline: 68% Advance
VIX: ~$13.50
Traded a recent low of $12.73. That’s the lowest it’s traded since pre-pandemic in early 2020 (i.e. with stocks at ATHs)
This weekend, I’d like to go over some monthly/quarterly charts and publish them for our premium members. Sometimes zooming out can help give some perspective that can get lost in the shorter timeframe charts. This worked well for us in Q3/Q4 of 2022.
Lastly, we have been light on individual stock trades lately as MSFT and TSLA did not fire, but that’s okay.
We have a decent-sized book right now and can operate against a break-even stop in all of them, so that really does leave us in a great position to either trim into more advantageous prices or exit without taking any real heat.
SPY — Gap-Up Note
Note that ~$439 is the gap-fill level and the 61.8% retracement of this decline.
If we fade from this morning’s gap-up, the SPY/S&P has to hold yesterday’s high/close, otherwise it risks being a reversal that opens it up to more downside.
Upside Levels: $439, $441, $443.50
Downside Levels: $437 to $437.50, $434.50, $431.50
S&P 500 — ES Futures
Pushed through the 4418-30 area and bulls have been in control. Now we see if 4467 is in play, then the highs in the 4490s.
Upside Levels: 4467-70, 4483, 4493-4500
Downside levels: 4435, 4410, 4400, 4385
SPX
Upside Levels: 4400-4407, 4423-25, 4445-4450
Downside Levels: 4370-75, 4345-50, 4328-35, 4300
Nasdaq — NQ Futures
NQ needs to clear 15,250 to see a push back to higher prices.
Upside Levels: 15,225-250, 15,350, 15,500
Downside Levels: 15,100, 15,000-20, 14,920
Russell — RTY Futures
We have mentioned the Russell’s recent performance and you can see why with the RTY working on its fifth straight daily gain and currently up about 5% from Monday’s low.
Now up through the 78.6% retrace of the decline, the RTY has to contend with the 1920-30 area, which was stiff resistance earlier this month (and is the 61.8% retrace of the Q1 range).
A breakout over 1930 could set the stage for a push to the 1980 to 2000 zone. However, failure will have bulls looking at 1875 for support.
Open Positions
Bold are the trades with recent updates.
Italics show means the trade is closed.
Any positions that get down to ¼ or less (AKA runners) are removed from the list below and left up to you to manage. My only suggestion would be break-even (B/E) or better stops.
** = previously mentioned trade setup we are stalking.
Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B. Now Add META, AVGO, UBER, CRM, AMZN and CVS.
4 longs, 2 shorts.
PYPL — short from about $68 — trimmed at $67 and $66, trimmed a bit more on the retest of y’day low. Should be down to about ⅓ to 40% position with a break-even stop. $64 to $65 is the next trim spot.
WMT — long from $154 — Trimmed ⅓ trim at $156 to $156.50. Trim more down to half at $156.35+, ideally $157+. Break-even stop.
— stopped out at B/E for those that used hardstop (like me).
FSLR — short from $189 — trimmed ⅓ or more (about 40%) at the $183.50 gap fill, traded sub-$177, so another trim down to roughly ⅓
Can keep a break-even stop, but down to runners into Monday’s low made sense, as we did note we were looking to “save some” of the position in the event of a potential “puke” down to ~$175 (and it gave us sub-$177).
Exit the rest or get down to runners if we retest Monday’s low.
INTC — Long from $33.75-ish, added some at $32.10. We rarely add, but as mentioned on Friday, “In hindsight, ~$32 was a better buy spot than $33.50 to $34.”
Cost basis: ~$33
Got another excellent opportunity to trim INTC on Tuesday above our Cost Basis as it traded as high as $34.23.
Stop at $31.75 hard. Can trim/exit on a push back to $34 and consider it a “kick save” on the position. Those who stick with it, $34.50 to $35 is the next profit target.
AMD — long from ~$109, the gap-fill and 10-week ema. Trimmed ¼ at $112.50+. Now to a break-even stop and look for $113+ for another ¼ trim. Not how we drew it up, but have to adjust our sails to the winds.
Next trim spot is $115 to $116.
DOCN — ½ position* at $38.25 — Able to make small trim at $39.75 to $40 and a second trim above $40.75 (near gap-fill and declining 10-ema).
Should be down to about a 50% to 60% position and this one really comes down to timeframe. Longer term traders (on the weekly chart) are fishing for $42.50 to $43.50, if not higher before their next trim.
Daily chart traders are exiting more of DOCN at a faster rate as it pushes back into its short-term daily MAs (like the 10-day and 21-day).
Both traders can utilize a Breakeven stop
Go-To Watchlist
Feel free to build your own trades off these relative strength leaders
Relative strength leaders → (List is growing long!)
Growth stocks ARKK — DOCN, SOFI, UPST, SHOP
LLY, CAH
AI stocks — NVDA, AMD, AVGO, ADBE, SMCI
Mega cap tech — MSFT, AAPL, META, CRM
Select retail — CMG, ELF, LULU
Homebuilders ITB — TOL, KBH, DHI
BRK.B
ABEV, DXCM (nice breakouts)
Cruise stocks — RCL, CCL, NCLH
DAL, DT, AMAT
Relative weakness leaders →
PYPL
MET
CF, MOS
PFE
EL, FL, DG
Economic Calendar
