Is That the Low?
Back-to-back 80%+ upside days bodes well for bulls.
Technical Edge —
NYSE Breadth: 87.4% Upside Volume (!)
NASDAQ Breadth: 82% Upside Volume (!)
VIX: ~$27
The bulls generated back-to-back days of 80%+ upside volume, showing the potential of renewed demand. Combined with the rally in bonds, there is at least some rationale that we have a short-term low to measure against.
Is it the bottom?
My gut says “no,” but there are at least some factors that support it.
A stretch of seven straight declines has always led to an intermediate or long-term low, but it’s also only happened three other times in the past ~90 years. The renewed breadth helps too, but I wouldn’t rule out retesting the low. How it reacts will be quite telling.
Game Plan — S&P (ES and SPY), Nasdaq (NQ and QQQ), Oil
S&P 500 — ES
The ES did exactly what we needed it to do yesterday: It cleared 4000 and Wednesday highs, vaulting it to the 4056 level and the 21-day moving average. Kudos bulls, you have been paid handsomely for your preparation and for taking on some risk!
Now look at where the ES is biding its time: 4056.
If it uses this level as a launch pad, Thursday’s high and the Globex high are in play at 4073.50 and ~4077, respectively. Above that opens the door to last week’s high at 4095. Now I would be quite content with 20+ points on the ES for a day’s work. But if we go weekly-up and don’t look back, a push into the 4120 to 4150 area is possible.
On the downside, I would love to hold the Globex low at 4041 and the 21-day. However, the must-hold level is actually 4000. Not only a psychologically relevant level, it’s also the 61.8% retracement of yesterday’s range and the 10-day moving average.
SPY
One-hour chart above and the daily chart below.
I would love to see the SPY hold the H1 10-ema and keep the trend alive as it tries to hold up over the key $405 level.
You’ll see on the daily chart that if we can take out Thursday’s high of ~$407, the weekly-up level near $408.50 is in play.
On the downside, if the 10-ema doesn’t hold on the H1 chart, let’s see if the SPY can stay above $400 and the 10-day moving average (just like ES and the 4000 level).
Nasdaq — NQ
Fairly straightforward with the NQ futures, as it sits right at the 21-day and yesterday’s high.
Either clear this area and push up to last week’s high near 12,595, or take a breather. If it’s the latter, the bulls will want to hold the 10-day. Below 12K and this could lose a lot of momentum.
Nasdaq — QQQ
We got the $300 level we were looking for, but now the QQQ is in a tricky spot. A push higher gets us our second target of $305 and the 21-day. Last week’s high sits up at $306.56.
On the downside, I want to hold the 10-day. The line in the sand is $295.
CL — Oil
Oil needs to clear $115.50 to $116.25. It continues to put in higher lows and the trend remains bullish. However, I don’t have an actionable setup on this at this time.
Over this zone does open up the $122.50 area, but the risk is quite wide in that scenario.
Wheat — ZW
Still consolidating. Maybe we get an inside day, which gives us inside-and-up potential next week. Otherwise, a slightly deeper dip could be in the cards and that’s ok.
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
Numbered are the ones I’m watching most closely. Bold are the trades with recent updates. Italics show means the trade is closed.
We have been spanking the very select individual trades we have taken. For that, I’m super grateful! It shows that discipline wins out in a tough tape.
XOM — All out of XOM and this one has been a banger. Back on the Go-To List it goes.
XLE —All out of this one too. Energy remains robust and is a staple on the 2022 Go-To List.
DXY / UUP — 103.50 to 104 would be the ideal first trim area. For UUP, that's $27.50 to $28. For UP, conservative bulls may be waiting for a gap-fill at $27.09 and a tag of the 50-day before getting long.
ZB (bonds) — Weekly-up in play → Looking to trim 143+ on 50% of the position or more. Can also look for that trim on a test of the 50-day, currently at 142’29.
MRK — Broke the 10-day with some force yesterday. Let’s see if it can regain this level and push into the $93 to $93.50 area for a ⅓ trim. Conservative longs without a position can wait for a potential undercut of Thursday’s low and a tag of the 21-day to get long if they prefer.
Relative strength leaders (List is cleaned up and shorter!) →
XLE — Above $79.75 and bulls can stay long this name.
AR
DLTR
CTVA
VRTX
AMGN
MRK
MCK
JNJ
BMY
Economic Calendar
