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"Sell in May and Go Away?" — Not So Fast.
More than 40% of the S&P 500 reports earnings this week.
Danny Riley
April 24, 2023
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Our View
Will the ES hold together at the end of April and blow up the old trading adage: “Sell in May and go away?”
I have to admit this narrow, back-and-fill trading range doesn't look bearish. If the ES rallies into the end of the month, who's to say we won't pop again like we did at the end of the first quarter?
A big driver to the action will be earnings and this week will be key with more than 40% of the S&P 500 reporting. A few of the most notable companies include:
#earnings for the week
eps.sh/cal
$AMZN $MSFT $META $FRC $KO $BA $VZ $GOOGL $UPS $ENPH $CLF $HAL $MCD $GM $GE $MMM $PEP $XOM $SPOT $INTC $AAL $V $ROKU $RTX $NEE $PHG $CAT $CVX $SNAP $LLY $VLO $LUV $BOH $MA $CROX $SIFY $JBLU $CMG $DOW $MO $ABBV $NOW $DHR $DX $NET… twitter.com/i/web/status/1…
— Earnings Whispers (@eWhispers)
6:54 PM • Apr 21, 2023
I did some reading over the weekend, including JPMorgan CEO Jamie Dimon’s letter to shareholders. I found this interesting (with link below).
After we spoke last year about storm clouds, some of those storms did, indeed, hit, and, unfortunately, some of those threatening clouds are still here.
2022 was not normal, economically speaking, and, in fact, 2022 witnessed several dramatic events — the Ukraine war began; inflation hit a 40-year high of 9%; the federal funds rate experienced one of its most rapid increases, up 425 basis points, albeit from a low level; stock markets were down 20%; unemployment fell to a 50-year low at 3.5%; and the U.S. economy was bolstered by frequent fiscal stimulus and by high and rising government debt while supply chain issues eased. In addition, work from home began to raise commercial real estate challenges and, finally, long- and short-term interest rates presented a sharply inverted yield curve, which is “eight for eight” in terms of predicting a recession (more on this later). But, surprisingly, the global economy marched ahead.
Our Lean
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MiM and Daily Recap
ES recap (15 min)
The ES traded down to 4140 on Globex and traded 4156.50 on Friday’s regular session open. After the open, the ES hugged above the 4452 VWAP until 9:52 when the ES got hit by a sell program that pushed the futures down to 4137.75 at 10:03, rallied up to 4158.25 at 10:28 and sold back off to a new low at 4135.25 at 10:46. The ES rallied back above the VWAP at 4150.25 over next 15 minutes, dropped down to a higher low at 4141.75, then barreled back above the VWAP up to the 4154 level. From there, it back-and-filled for the next 45 minutes and then traded up to a new high at 4161 at 2:18.
The ES pulled back down below the VWAP at 4147.50 at 3:09 as the early imbalance showed $37 million to sell and traded 4151.50 as the 3:50 cash imbalance showed $100 million to sell, traded up to 4157.50 at 3:58 and traded 4156 on the 4:00 cash close. After 4:00, the ES chopped in a few-point range and settled at 4153.25, up 0.75 points or 0.02% on the 5:00 futures close.
In the end, the narrow ranges of the last week and a half have been filled with false starts. The ES sells off and looks lower, then rallies; the ES rallies and looks like it's going to keep going up and it rolls over. In terms of the ES's overall tone, I think a lot of the buying was options related. In terms of the ES's overall trade, volume was steady at 1.6 million contracts traded.
MIM
Technical Edge —
NYSE Breadth: 41% Upside Volume
Advance/Decline: 46% Advance
VIX: ~$17.50
S&P 500 — ES
The two-day low between 4135 and 4137 will be key on Monday. Below this level could put the 21-day in play. Above 4161 gives us a daily-up and is what’s required for the ES to push into the 4175 to 4180 area.
ES Daily
Upside Levels: 4161, 4175-80, 4200, 4217-25
Downside levels: 4135-4137 (two-day low), 4125, 4115, 4095-4100
SPY
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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 B/E or better stops.)
** = previous trade setup we are stalking.
Down to Runners in GE
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LLY [premium only]
Go-To Watchlist
Feel free to build your own trades off these relative strength leaders
Relative strength leaders → Tech remains absolutely the strongest group lately.
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Economic Calendar
None.