Two-Day Fed Meeting Begins. Time to Throttle Back a Bit

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Our View

The ES made a quick push above 4200 and the April high yesterday, then faded later in the day. Breadth was mild (at best) and the bulls just didn’t have it in them to finish strong.

There is likely a lack of commitment at play here too. AMD reports earnings on Tuesday after the close — and could hold sway over the semiconductor space, which has helped lead the market rally — then Apple reports on Thursday.

Remember, Apple is 1 of 7 stocks leading the charge higher, with the group garnering almost 90% of the S&P’s current rally.

There’s also the Fed’s rate decision and press conference on Wednesday. The market is currently pricing in a more than 90% likelihood the Fed raises rates by 25 basis points later this week, but it will be more about what the Fed has to say about rates going forward that the market will care about.

Our Lean

I'm going to throttle this back a bit today. After yesterday's mindless low-volume grind, I see no reason to over push. I think today could be a “sell the rallies” kind of day, but I want to remind everyone that 'thin to win' worked for the most part yesterday and we could see more of the same today.

I feel like scaling into an ES short for Wednesday, but I just don't want to be under water on the average. Here are some of the levels we are watching today.

On the upside, 4200 to 4210 remains resistance. Above it could put 4242 in play. On the downside, 4150-ish is one support area, followed by 4135 to 4140. Below that and I have ~4120 on my screen.

MiM and Daily Recap

The ES traded up to 4196 on Globex and opened Monday's regular session at 4183.25. After the open, the ES sold off down to 4181.50 and rallied up to 4197.25 at 9:43, back-and-filled around the VWAP at 4191, rallied up to 4199.25 and then dropped down to 4185.50 at 11:26. After the drop, the ES rallied up to 4206.25 at 12:41 and pulled back down to the 4196.50 level and back-and-filled for the next 45 minutes before the ES traded down to 4184 at 2:38. From there, it rallied up to 4192 at 3:03 as the early imbalance showed $495 million to buy.

The ES traded 4189 at 3:50 as the MIM showed over $1 billion for sale, hit a high of 4190.75, then faded and traded 4184.75 on the 4:00 cash close. After 4:00 the ES traded up to 4190.75, sold off down to 4178.75 and settled at 4179.50, down 9 points or -0.21% on the day.

In the end, the ES rallied off of very low volume, then lacked buyers to keep it up into the close. In terms of the ES’s overall tone, it was very much a two-way trade. In terms of the ES's overall trade, volume was low at 1.19 million contracts traded. Bitcoin got pounded, oil closed down 1.34% and wheat made new lows (while having record short open interest).

Technical Edge —

• NYSE Breadth: 44% Upside Volume

• Advance/Decline: 40% Advance

• VIX: ~$16.50

We’ve just had our best individual stock run of the year, so with the Fed meeting starting today, Apple on Thursday and the jobs report on Friday, I’m pumping the brakes a bit here and just focusing on the indices (although 1 stock sticks out, below).

Keep it light and stay sized right. We’re at an interesting juncture here as May starts off on tricky footing.

S&P 500 — ES

~4200 held as upside resistance as the ES now sits on the 10-ema on the 4-hour chart.

• Upside Levels: 4200-06, 4242

• Downside levels: 4150, 4135-4140, 4120, 4095-4100

SPY

The bears aren’t ready to call it quits on the $415 to $416 resistance area just yet.

• Upside Levels: $415-16, $418.31, $421.25

• Downside Levels: $410-11, ~$406.50, $404

Note: The 10-ema on the 1-hour chart held as a decent albeit small bounce zone yesterday. Not likely today. Remember, we’re peeling our foot off the gas a bit here.

SPX

• Upside Levels: 4170, 4195-5200, 4200

• Downside Levels: 4118-25, 4100, 4075-80

QQQ

Same as Monday and “job well done” as the $321 breakout level held as support for the QQQ. Needs to remain that way for the bulls.

• Upside levels: $323.65, $325

• Downside levels: $321, $318

NQ

13,330 to 13,350 area remains current resistance.

• Upside Levels: 13,370 (daily-up), 13,450-500

• Downside Levels: 13,250 (daily-down), 13,150

WYNN

Wynn just keeps trying and just keeps stalling in the $116 to $117 area. If we get a close above this area or a daily-up over $117.86, bulls are going to try and finally squeeze this one higher.

If that’s the case, $120 to $122 is the first trim zone, but ideally, we’re looking to power this one up to the $124 to $126 area. On the downside, the ideal stop is down at roughly $107, which is very wide.

How do we combat this?

1. I would either go with small size and use the $107 stop

2. Go normal size and use $114 as the stop (knowing I may get stopped and have to retry on another breakout attempt) or

3. Use calls (if proficient with them) and size them with the risk that they could lose 60% to 100% of their value.

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, CAH, LLY, ABBV, AAPL, MCD & BRK.B

1. BRK.B — long from $319-ish — trimmed $325 to $325.25+, then $327+ and finally down to runners or out at $330+ — Wow, what a sequence!

2. MCD — Long from $291.50 — trimmed ⅓ at $292.50+, down to ½ or less at $295+ and Down to runners at $297.50+ — Another congrats to longs

Go-To Watchlist

Feel free to build your own trades off these relative strength leaders

Relative strength leaders →

1. MCD, PEP & KO, WMT, PG — XLP

2. LLY

3. NVDA, CRM

4. MSFT, AAPL, META

5. PANW, FTNT (10-week/50-day combo & prior breakout level)

6. ULTA & LULU

• GE

• HCA

• DKS

• WYNN

• MELI

Economic Calendar

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!