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The ES Wants Higher, But First It’s Got to Chew Through the Rebalance
Danny Riley
June 23, 2026
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The yield on the 10-year note climbed above 4.5% as bets increased that the Fed will raise rates this year to counter price pressures from the U.S./Iran war. The jump in yields definitely played a role in the tech sector's weakness.
Yesterday's news on the negotiations with Iran improved, with oil falling and the U.S. clearing the way for Iran to sell oil in dollars, which includes American buyers. I think it's right to remain suspicious about the deal, and I disagree with setting up a $300 billion agreement without securing Iran's uranium program, but Trump is desperately trying to lower oil prices.
It's going to take 4 to 6 days to completely open the Strait and 2 to 3 weeks to restock global oil supply chains. Crude oil travels across the ocean at roughly 13 to 15 knots, or 15 to 17 mph, making physical distance the primary driver of global restocking times.
Once transit through the Persian Gulf resumes, shipments reach primary buyers in East Asia within 2 to 3 weeks, while longer ocean voyages extend delivery timelines to 3 to 5 weeks for Europe and 5 to 6 weeks for the United States.
I hate being a pessimist, but even if the Strait were fully opened today and oil started moving freely, it's going to take over a month to replenish supplies. During that time, something many countries, including Europe, do not have is excess inventory.
According to data from the International Energy Agency, or IEA, global observed oil stocks have been depleting at a record pace, drawing by an average of 3.8 million barrels per day since the start of the conflict.
There are 6 trading sessions left in June, and while I still think the markets will go higher, I also think the ES and NQ could use a few days of back-and-filling.
While the last 4 sessions in June and the first week of July are bullish, I have to say I am a bit concerned about the $18 billion sold on the 3:50 imbalance last Wednesday and Thursday.
I am also a bit concerned about a research note led by Nikolaos Panigirtzoglou, JPMorgan's Managing Director of Global Strategy, regarding the $165 billion rebalancing wave. The breakdown of the data and exact projections from Panigirtzoglou's team detail the mechanical flows expected as the final trading sessions of June arrive.
Breakdown of the $165 Billion Institutional Flow
The research isolates specific mandates across the planet's largest pools of capital, showing exactly where the supply is coming from and where it is being redirected:
Japan’s Government Pension Investment Fund (GPIF): Projected to be the largest single source of supply, offloading approximately $60 billion in global equities to realign with its core asset allocation targets.
U.S. Defined Benefit Pension Plans: Managing roughly $9.6 trillion in aggregate assets, these corporate and public funds are expected to sell about $55 billion in stocks.
Norway’s Sovereign Wealth Fund (Norges Bank Investment Management): Expected to supply roughly $40 billion in equity liquidation across global markets.
Swiss National Bank (SNB): Estimated to dispose of up to $25 billion in equities. Note: The note mentions this number could scale down to roughly $8 billion if their internal policy shifts their target equity allocation closer to a 30% cap from its previous 28% level.
The Fixed-Income Destination
Because this is a classic multi-asset rebalancing execution, the capital sourced from trimming winning equity profiles is structurally bound for the bond market. JPMorgan’s model expects a corresponding $165 billion rotation into fixed income, which historically acts as a temporary compression mechanism for Treasury yields into month-end.
Stretched Multiples & High Leverage Tailwinds
Beyond the mechanical rebalancing figures, Panigirtzoglou’s team highlighted a secondary risk factor built into current market structure: leverage concentration in the semiconductor and AI space.
The strategy note notes that the semiconductor sector's share of global equity value has surged to over six times its actual revenue share—a valuation-to-fundamental disconnect that is more than double the ratio seen in the rest of the Magnificent Seven. Combined with prime brokerage data indicating net hedge fund leverage sits at a four-year high, the report warns that even routine, automated rebalancing flows risk triggering short-term value-at-risk (VaR) shocks if thin summer liquidity catches automated programs off guard.
I get it. Historically, while headlines declaring a $165 billion wave of selling can sound ominous, the actual structural effect on the tape tends to be more of a short-term liquidity distortion than a directional regime change.
Here is how these flows generally impact market structure and why the macro picture usually remains intact:
The Direct Tape Impact
Intraday Liquidity Shocks & Two-Way Volatility
Because these flows are purely mechanical and mandate-driven rather than fundamental, execution desks don't wait for good prices—they just execute. When these massive block orders hit the order books, especially during thin summer liquidity, they can easily trigger sudden, sharp value-at-risk (VaR) shocks.
If algorithms or systemic hedge funds hit self-imposed risk or volatility thresholds due to these rapid institutional block trades, they are forced to trim, causing rapid 100+ point swings in indices like the Nasdaq within short windows.
Sector-Specific Pressure Points
The selling isn’t distributed evenly. Because portfolios are trimming winners, the concentration risk is heavily localized in crowded trades. Right now, the core pressure point sits in semiconductors and mega-cap tech, where positioning is highly stretched. This can make the broader tech sector feel incredibly heavy into the close, even if defensive sectors or underlying cash bids attempt to hold key support lines.
Why History Says It Usually Gets Absorbed
While JPMorgan notes that this rebalancing wave is nearly three times the size of last September's, historical data shows these structural warnings are frequently blunt objects:
The 2023 Precedent: In June 2023, JPMorgan issued a nearly identical warning forecasting a massive $150 billion institutional equity liquidation, warning it could pull global stocks down by as much as 5%. Instead, the S&P 500 brushed off the technical flows and rallied 6.6% over the month.
The Buyer Matrix: Mechanical selling rarely happens in a vacuum. It is regularly met by powerful structural counterweights: corporate buyback windows, passive monthly inflows, and long-term institutional buyers sitting at historical high-volume nodes (HVNs) waiting to absorb pullbacks.
The Bottom Line
Does it affect the market? Yes, but mostly as a liquidity and volatility event. It creates highly choppy, two-way price action and heavy sector rotation into month-end, but it rarely changes the dominant macro trend. Once the institutional housekeeping wraps up, the tape inevitably reverts to tracking core fundamentals: corporate earnings, macroeconomic data, and central bank policy.
This type of stuff does not wait until the last hour of the month; it's too massive. As I write this at 9:30 p.m., the ES and NQ are making new lows, 7512 on the ES and 30410 in the NQ. The other thing I wonder is, after all the weeks of negotiations with Iran and all the false starts, do the markets sell the news of a real deal?
This headline just hit: US Ambassador to the UN cautions that the Memorandum of Understanding is a preliminary framework, not a final agreement.
Our lean: As I said above, the ES and the NQ need a few days of back-and-fill. I'm not backing off seeing the ES go higher, but higher yields, the lack of a final or signed deal with Iran, and the massive rebalance will cause two-way price action, and that's exactly what we have been seeing for the last several sessions.
Our Lean — Danny’s Trade (Premium only)
Tom Incorvia - Blue Tree Strategies
XLI
XLI spent two months in balance, rotating around the accepted value near 170–176. Demand then outweighed supply, auctioning price out of the top of the range. Higher prices are being accepted rather than rejected, confirming the departure is holding.
EMR
EMR spent roughly two months in balance, rotating around the accepted value near 136–145. Demand then outweighed supply, auctioning price out of the top of that range. The departure has carried up into a prior balance area near 148–152, an old zone of two-sided agreement from February. Price is now testing that overhead value rather than backing away from it, and the higher prices are being accepted rather than rejected. That acceptance, this close to the highs, says the buying auction wants to continue. The open question is whether the prior balance acts as resistance or gets absorbed — but so far price is behaving as though it intends to work higher.
ETN
ETN built a balance area near 350–372 through February and March, then demand outweighed supply and auctioned price higher into a second, higher balance near 390–432. That migration of value — one balance stacked cleanly above the prior — is the signature of an uptrend, each range marking a higher level of accepted agreement. Price is now working the upper end of that second balance near the 435 highs. The higher prices continue to be accepted rather than rejected, keeping the buying auction in control. So far the structure reads as a market stepping value higher in stages rather than one exhausting itself.
After the open, the ES traded 7571.50 and rallied 27.75 points up to 7599.25 at 10:00. It sold off a few times and made a lower high at 7591.00 at 10:15.
After the open, the ES traded 7571.50 and rallied 27.75 points up to 7599.25 at 10:00. It sold off a few times and made a lower high at 7591.00 at 10:15. It then dropped 30.50 points down to 7560.50, traded 7562.25, sold off 22.25 points down to 7540.00 at 10:30, traded 7549.25, and sold off 22.00 points to 7527.25 at 10:45. From there, it rallied 22.75 points up to 7550.00 at 11:00 and did a sideways-to-up back-and-fill up to 7559.25 at 11:45. It then sold off 27.00 points down to 7532.25 at 12:00 and rallied up to 7550.25 at 12:20.
The ES traded 7536.75, traded up to 7549.50 at 1:50, traded back down to 7538.50 at 2:00, and rallied 15.25 points up to 7553.75 at 2:40. It sold off 25.25 points down to 7528.50 at 3:40 and traded 7535.25 as the 3:50 cash imbalance showed $1.3 billion to buy. It rallied up to 7545.75 at 3:55 and traded 7540.25 on the 4:00 cash close.
After 4:00, the ES traded up to 7547.25 at 4:20, traded down to 7540.50, and settled at 7540.75, down 30 points or -0.40%. The NQ settled at 30,662.50, down 57.25 points or -0.10%, and the YM settled at 51,888, down 120 points or -0.23%.
Roundhill Magnificent Seven ETF (MAGS)
GOOG 64.02 -1.42 (-2.17%) 06/22/26 [NYSE Arca]
In the end, it was an early rally, selloff, and then 5.5 hours of chop as several big tech names fell. SpaceX fell 16%, and Alphabet had its worst session in more than a year, falling 5%. In terms of the ES's overall tone, the ES, NQ, and YM markets gave up their early gains by 10:00 a.m. In terms of the ES's overall trade, volume was steady, with 1.5 million contracts traded.
Market-on-Close Recap
The MOC opened with a buy-dollar bias, while the symbol count stayed more rotational. Opening at +$953M. From there, the buy side expanded sharply, peaking near 15:54 at +$2.34B before steadily fading into the close. By 16:00, the final imbalance still settled positive at +$1.65B, with $4.28B to buy versus $2.63B to sell. The important transition was that dollars remained buy-biased, while the number of symbols leaned slightly sell most of the way, showing large-cap buying against broader two-way or rotational flow.
The headline lean at 15:51 was +54.0% by dollars but -50.3% by symbols across all markets. That is not a wholesale market buy, but rather a mixed auction with concentrated buy dollars. NYSE showed a similar setup at +53.5% dollar lean and -53.1% symbol lean. The S&P 500 was firmer, with +56.1% dollar lean and +54.6% symbol lean. Nasdaq was the most notable index pocket, with a +54.6% dollar lean and a stronger +66.3% symbol lean, putting it right at the threshold of a broader buy-side participation read.
Sector flow was split. Communication Services was the strongest large sector buy, totaling +$645M with an +83.1% dollar lean, which is notable wholesale-style buying. Real Estate, Utilities, and Industrials also leaned firmly buy, while Energy was positive but more rotational at +59.4%. Basic Materials showed a perfect +100% lean, though on only one symbol, so it was less representative.
On the sell side, Consumer Staples was the cleanest notable sector, with a -66.5% dollar lean and -66.7% symbol lean, signaling broad wholesale selling. Financials, Consumer Discretionary, Materials, and Information Technology also finished net for sale, though most were closer to rotational-to-firm sell pressure.
Single-name action was concentrated. Buy demand centered on GOOGL, NVDA, AMAT, LRCX, AVGO, TSLA, GOOG, STX, ACN, and JPM. Sell pressure was led by MU, MSFT, SNDK, AMZN, SPGI, LLY, TXN, PSX, KO, GLW, and WDC. The close was ultimately a buy-dollar auction, but not a clean broad-market buy.
Daily Market Recap 📊
For Monday, June 22, 2026
• NYSE Breadth: 50% Upside Volume
• Nasdaq Breadth: 64% Upside Volume
• Total Breadth: 60% Upside Volume
• NYSE Advance/Decline: 41% Advance
• Nasdaq Advance/Decline: 43% Advance
• Total Advance/Decline: 42% Advance
• NYSE New Highs/New Lows: 126 / 108
• Nasdaq New Highs/New Lows: 304 / 236
• NYSE TRIN: 0.69
• Nasdaq TRIN: 0.41
Weekly Breadth Data 📈
For Week Ending Thursday, June 18, 2026
• NYSE Breadth: 43% Upside Volume
• Nasdaq Breadth: 60% Upside Volume
• Total Breadth: 54% Upside Volume
• NYSE Advance/Decline: 46% Advance
• Nasdaq Advance/Decline: 52% Advance
• Total Advance/Decline: 50% Advance
• NYSE New Highs/New Lows: 273 / 127
• Nasdaq New Highs/New Lows: 609 / 395
• NYSE TRIN: 1.13
• Nasdaq TRIN: 0.72
ES & NQ Levels (Premium only)
BTS Levels are an OP Premium Feature.
Polaris Trading Group Summary - Monday, June 22, 2026
The PTG room followed a well-structured Cycle Day 3 session yesterday. David’s DTS levels provided the main roadmap, with several targets fulfilled and multiple teaching moments around auction behavior, D-Levels, ATR tools, and market structure.
Morning Setup
Overnight recap:
ES low target 7515 fulfilled and reversed
ES high target 7575 fulfilled and reversed
Both moves aligned with the DTS briefing.
David clarified that the day was Cycle Day 3, since the holiday session counted as Cycle Day 2.
Opening Trade Activity
A member identified a D-Level near 7588.
David confirmed:
“DLevel short in-play”
The trade worked quickly:
First target filled at prior high
Third target 7585 from the DTS briefing fulfilled
This was one of the cleanest positive trade sequences of the session.
Early Market Read
David defined the initial sandbox as:
7575–7595
Around 10:00 AM, he noted:
Higher prices were being accepted.
This was a bullish development.
Traders should continue probing longs until a structural shift appeared.
Auction-Flip Lesson
Orest asked how to recognize when the auction has flipped.
The room discussed using ATR tools to identify changing auction behavior.
Orest described his interpretation:
When ATR4 drops below ATR10, the long auction may have flipped.
David confirmed:
“Yes, that view is correct.”
Lesson:
Use ATR relationships to help identify when momentum or auction direction may be changing.
Mid-Morning Rotation and Target Discussion
Slatitude shared that he entered short at 7591 around 10:13 AM.
Later, he asked whether 7529 could be a potential target by looking left.
David confirmed:
7529 was the prior value low
This reinforced the value of using prior structure and market profile references for target selection.
BLT Setup
Slatitude shared that he took a BLT trade and posted a screenshot.
This was another positive example of a member applying the PTG setup framework.
Lesson:
Wait for recognizable setup structure rather than chasing price movement.
River Bands and Order Flow Lesson
Orest asked whether narrower river bands meant a stronger underlying current.
The group discussed:
River slope
Speed of the move
Current direction
“White water” conditions
A later discussion compared the green river signal with red bid/ask order-flow readings.
Key takeaway:
Indicators may not always agree.
Bid/ask ratio may be more useful in HVN areas and less reliable around LVNs.
Market context matters more than any single indicator.
Midday Consolidation
After a short break and chart refresh, David noted the market was consolidating around:
7545 Line in the Sand
Also identified as the HVN
This became the key midday balancing level.
Afternoon Session
David returned around 2:20 PM and again highlighted consolidation near the 7545 Line in the Sand.
He also shared a market note that tech stocks were outperforming the S&P 500 by the largest margin in 30 years.
Later, Slatitude identified a possible D-Level at:
7512.50
David confirmed:
“Correct.”
Closing Read
Near the close, David said price looked to be settling near:
7545 Line in the Sand
He also noted:
Positive 3-Day Cycle: 92.92%
MOC: modest $1 billion buy imbalance
Positive Trades and Calls
Overnight DTS targets worked well
7515 low target fulfilled and reversed.
7575 high target fulfilled and reversed.
Opening D-Level short
D-Level short near 7588 was confirmed.
Targets were quickly fulfilled, including 7585.
Short from 7591
Slatitude reported entering short near 7591.
The later discussion of 7529 as prior value low gave a logical downside target reference.
BLT trade
Slatitude took a BLT setup and shared the chart.
Good example of applying the PTG process.
D-Level identification
The afternoon D-Level near 7512.50 was correctly identified by a member and confirmed by David.
Lessons Learned
Follow the auction until it shows a structural shift.
Higher price acceptance can be an important bullish clue.
ATR4 versus ATR10 can help identify when an auction may be flipping.
Prior value levels, D-Levels, HVNs, and LVNs are useful for trade location and target planning.
Indicators should be read together, not in isolation.
The best trades came from prepared DTS levels and recognizable PTG setups.
Discovery Trading Group Room Preview – Tuesday, June 23, 2026
Market Tone
US futures are sharply lower in a tech-led risk-off move.
Nasdaq futures are down more than 2%, with ES and RTY following lower.
VIX is up more than 14%, pointing to renewed hedging demand.
SpaceX is the main flow driver, down more than 16% and weighing on mega-cap growth, AI-adjacent, and speculative tech names.
Macro Backdrop
Inflation remains the key market constraint, keeping the Fed-restrictive narrative in place.
Gold is weaker despite geopolitical uncertainty, suggesting safe-haven demand is limited.
Crude is also lower as shipping data shows oil continues to flow through Hormuz, easing supply-shock concerns.
Softer oil is a modest stabilizer for index futures despite the tech-driven volatility.
Sector Focus
AI-capex volatility remains a major theme.
Oracle announced 21,000 job cuts alongside a planned $50B AI infrastructure expansion.
ORCL is down 5%, adding pressure to the broader tech tape.
Earnings & Calendar
Carnival reports this morning.
FedEx is the main earnings event after the bell.
Paychex reports Wednesday morning.
Key data:
ADP Weekly Employment Change: 8:15 ET
Flash Manufacturing & Services PMIs: 9:45 ET
Richmond Manufacturing Index: 10:00 ET
ES Technicals
Volatility remains elevated, with the ES 5-day average daily range at 105.25 points.
No clear whale bias as large trader activity was significant but mixed overnight.
ES trendlines held Monday’s session, but the intermediate uptrend channel bottom near 7225/30 broke overnight and may now act as resistance.
ES 50-day MA at 7424.50 is nearby loose support.
ES Levels
Resistance: 7525/30, 7610/15, 7630/25, 7935/40
Support: 7243/38
