Nasdaq 100 Rebalance and Monthly Options Expiration on Deck
Earnings reactions remain suspect
Technical Edge
NYSE Breadth: 42% Upside Volume
Advance/Decline: 40% Advance
VIX: ~$14 — showing no panic whatsoever
So far, we’re getting a run-of-the-mill dip after an extended rally. It’s why the buy into the $451s on the SPY was such a reasonable risk-reward setup for bulls, as they buy into solid support amid an overall strong trend.
The long-Dow trade has worked well too — maybe too well — as the index has powered higher in nine straight sessions. That strength comes amid weakness in the Nasdaq and the S&P, while the so-called “Magnificent 7” get a bit of a shake-up.
That’s as the Nasdaq 100 enacts just its third special rebalance in its history. Because these stocks — AAPL, MSFT, GOOGL, AMZN, NVDA, TSLA and META — have become so large, they now account for more than 55% of the index.
The rebalance should give the markets a little turbulence, of course, but likely nothing to alter their current course. If anything is going to do that, it will be earnings.
Yesterday’s ~60% downside volume dip was nothing alarming, suggesting more of a profit-taking/earnings reaction outcome vs. an outright reversal. That said, we’re not getting the best reaction out of earnings and companies appear to be lacking the beat-and-raise releases that many would argue are necessary to justify the 37% YTD rally we’ve seen in the Nasdaq and the near-20% run in the S&P.
That’s fair.
MSFT, META, AMZN and GOOGL all report next week, which will be key to big tech. V and MA will also report, giving us some insight into the consumer. So far, DFS and AXP’s reactions are not exactly reassuring.
Anywho, let’s get through Friday’s monthly opex and that big rebalance.
SPY
I think we’ve got to be pretty damn happy with this setup in the SPY, no? It took a day or two to develop, but once the sellers took over, the $451s came into play, with prior resistance near $451.50 holding as support, along with the 10-ema on the 4-hour chart (the blue-dashed line) and 78.6% retrace.
Here’s the before chart (from yesterday):
Now here’s the after:
So what about today?
If you bought yesterday’s late-day dip, I would be profit-taking this a.m. and moving to a break-even or better stop if keeping a partial position open. Remember, we can always re-establish.
The $454.50 to $455 area looks key to my eye. It’s where prior support was before the SPY broke down and traded lower. If it’s reclaimed, the highs near $456.50 (and then some) could be back in play.
On the downside, yesterday’s lows are an important pivot. A break below and failure to regain it puts the 10-day ema in play currently near $449.
Upside Levels: $454.50 to $455, 456.50, $459
Downside Levels: $451.50 to $451.75, ~$449 + 10-day ema
S&P 500 — ES Futures
Nice 1-hour chart below shows the overnight rally we’re seeing for anyone who bought that late-day dip yesterday.
The ES is ramming back into the 50% retrace of the dip, along with a prior support zone. If it can clear this area, it opens the door back up to the 4590s. Above yesterday’s high can put 4600+ in play.
On a dip, short-term buyers want to see ~4575-ish hold as support.
Upside Levels: 4582, 4590-94, 4600, 4610
Downside levels: 4575, 4555-57, 4545, 4530-33
SPX
Pivot: 4450-53
Upside Levels: 4560, 4567.50, 4578-80, 4600
Downside Levels: 4527.50, 4500-05
V
Weakness in AXP and DFS may not be foreshadowing a great situation for V, but keep an eye on the retest of the $234-36 area and the rising 21-day moving average.
That’s a retest of the Q1 and Q2 highs and a key moving average.
ARKK
Very similar setup here, we maybe should have taken a little more off the table on that rally, but ultimately, I am looking for a retest of the Q1 and Q2 highs near $45.50, along with the 21-day sma.
If it fails, we’ll know in a hurry. Can use a tight stop in that case and can always re-engage if knocked out. Size accordingly.
Open Positions — Absolutely Robust Performance
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.
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Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B. Now Add META, AVGO, UBER, CRM, AMZN, CVS and AMD.
DOCN — Long from $38.25 — Small trim at $39.75 to $40 and a second trim above $40.75. Trimmed more between $45 and $47 and down to ⅓ at $49.50+
Should have us down to a ⅓ position. I think we may be able to get $53+ out of this.
JPM — Retested the breakout zone and long. This is a longer term swing. Many are long from $143-145. Still carrying ¾ to ⅔ of position against a break-even stop-loss.
Down to ½ if we see $157 to $157.50+ (or anything above Thursday’s high if playing more conservative)
ARKK — Long from ~$46 — trimmed near/at $50. Still carrying ⅔ to ¾ of position. Trim at ~$52
HSY — Longer-term swing. Want to see this one hold $235-36, but willing to be patient.
Minor trim $247.50, if preferred.
DAL — long from $47.20 (daily-up) and trimmed at $48. Trimmed down to ½ at ~$48.50. $49 is technically the next trim spot, but aggressive bulls can just go for the post-earnings highs near $49.80.
Break-even stop
**SBUX — Either long from ~$101.42 or waiting for $102.50+ (the monthly-up rotation). If long currently, $99 to $99.50 looks like a low-risk way to proceed and $103 seems like a reasonable ¼ trim for those already long.
DIA — long from ~$346.75. ¼ trim near $350, down to ⅓ at $351.50. Notice the rejection from the 78.6% retrace (of the bear market range).
B/E stop from here. I’m okay with getting down to a 40% to 50% position if we see $354-55+ today
YM — long from ~34,900 and ⅓ trim at 35,225 (+325). Second trim at 35,417+ (+517) and finally, small trim at 35,500 (+600)
Can trim down to ¼ to ⅓ position if we see 35,500+
While I do think the YM can keep going, it’s on a 9-day win streak, so better to be prudent and take the gains, then look to re-establish a long, IMO.
WMT — went weekly-up from this week’s play — Trim above $157 and ideally, above yesterday’s HOD. $158 is the next trim level, to get down to maybe a 60% position. Ultimately I want to see $160+ on this.
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
Relative strength leaders →
(Lack of updates here but these names remain my top focus list!)
Growth stocks ARKK — DKNG, DOCN, UPST, SHOP
LLY, CAH
AI stocks — NVDA, AMD, AVGO, ADBE, SMCI
Mega cap tech — MSFT, AAPL, META, CRM
Select retail — CMG, ELF, LULU, COST
Homebuilders ITB — TOL, KBH, DHI
BRK.B
ABEV, DXCM
Cruise stocks — RCL, CCL, NCLH
DAL, DT, AMAT
Relative weakness leaders →
DIS → new 52-week lows
CF, MOS
PFE (all vaccine gains now gone)
EL, FL, DG
Economic Calendar
