I Don't Like a Higher Open in a Down Tape

But we have a tight two-day range to navigate, thankfully.

Technical Edge — 

• NYSE Breadth: 13% Upside Volume (!)

• NASDAQ Breadth: 28.5% Upside Volume 

• VIX: ~$30.80

Game Plan: S&P, Nasdaq

We’ve had six 80%+ downside days in the last 10 trading sessions, with two of those sessions in excess of 90%+ downside days. That’s a lot of distribution and, quite frankly, something that doesn’t normally occur unless we’re near some type of low.

That doesn’t mean the low is in necessarily, but it has me on the hunt for some positives as we look to turn the page to Q4. We could still have some sort of capitulation move (which I would feel much better about if we saw it), so for now, the breadth numbers are just something to put in our back pocket. 

Otherwise, the trends and price action are not very constructive. 

Bonds are enjoying a meager rally in the pre-market after making new 52-week lows yesterday. The dollar index made new highs yesterday, which again, is a negative for equities. 

Now coming into the day with the SPY up 1.4% and the ES up 50+ handles, the open will be interesting. 

Long-time members know this, but for some of our recent additions, I must mention that I don’t like gap-up opens in a bear tape. It’s much harder to bottom that way. Further, with the VIX in the upper $20s and especially $30+, I shy away from almost all individual setups. 

We were really patient through Q2 and layered on some down-right excellent traders in the summer. And now we’re back to waiting. I know it’s boring, but it is what it is — it’s better than being excited and losing money. We can go to the casino for that type of action.

There are four that do have my attention and it’s mentioned in the Go-To Watchlist area, with a link to the charts. 

S&P 500 — ES

There was a great fade opportunity yesterday in the ES, and it was directly from yesterday’s 4H chart we posted for yesterday’s game plan. Friday’s cleaned up nicely too. 

I hope these are helping traders navigate the current action. 

The ES is trying to rally now, but coming into the session “hot” makes it hard to chase. Watch yesterday’s high near 3730. Above it and we get a daily-up rotation. Daily-up could give us ~3750, which was a key area a few months ago. 

I don’t see the ES waltzing through the declining 10-day and/or 3800 level. 

My concern is: Gapping-up in a bear tape and just to get to the daily-up spot, the ES has to climb 1.6%. That’s a big move. 

About the worst thing bulls could see happen, would be a higher open like this, a tag of the highs and a flush to take out the two-day low around 3660. 

SPY