Monthly Opex Keeps the "Chop Trade" Alive

Which is right, stocks or bonds?

I want like hell for this to be the low, but when I look at the poor action in the bonds — a new 52-week low on Wednesday — and the strong action in the dollar, it’s hard to think that equities have a long-lasting bullish runway ahead of them. 

Further, we never got a robust upside breadth reading combined with a robust advanced/decline reading off last week’s low. 

As much as I want this to be the low — and it could be — the weight of evident just isn’t there yet.

Yes, last week’s rally/reversal was impressive, and it came off of a key area that we have highlighted several times in the last four months (for the ES, SPY and SPX). 

Earnings have had a good reaction so far, and if the dollar fades and the bonds gain, then I’d be willing to think more upside exists. Until then though, we must remain prudently defensive. 

What I can’t decide is, is Friday’s monthly Opex keeping stocks up amid a backdrop of falling bonds, or are stocks right and the bonds are being held down due to Opex? Generally, the assumption lies with bonds being right, but we’ll know soon enough. 

Technical Edge — 

• NYSE Breadth: 25% Upside Volume

• Advance/Decline: 23% Advance 

• VIX: ~$30.75

I know some of you are chomping at the bit for more setups. They will come in good time! Right now, I must remind you that cash has been the best-performing asset this year (with the dollar index up almost 20%). 

Let’s not get complacent and force trades when nothing is there. Years ago, I vowed I would not publish trade ideas for the sake of generating trade ideas; I would publish my actual game plan each morning, whether it was boring or not. We must adapt to the landscape in front of us and right now, we have a tough landscape. 

Continue to focus on the bonds and the dollar as your guide to the S&P. With that, let’s look at the latter. 

Note: XLE update is below, under “Go-To Watchlist.” I am just going to outline the /ES and SPY this morning and look for better setups after the open. 

S&P 500 — ES 

The ES continues to hold the 10-day and 21-day moving averages, but still below last week’s high. 

If bulls can grab control into Opex, we could make a push into 3800, then potentially set the stage for 3900. 

On the downside, draw a line on your chart — or better yet, use the one below — at 3675. Below that opens the door to 3639, then 3600. 

No B.S. Look at the /ES