Market Insights: Monday, June 10th, 2024.

SPY opened down $.83 on overnight weakness and profit taking. In the first hour the market fell a bit further until it found support once again at $532.50 where it reversed course and rallied to close the day at $535.66, trading inside of Friday’s range and up 31 basis points. A couple of tests of $535 with two pullbacks, but at the end of the day, the market rallied into the close. The Nasdaq also gained similarly rising 39 basis points with the Dow gaining .18% and the Russell rising .34%. Volume for SPY was 35.69 million shares, a bit low but to be expected until this week’s economic news start being released. 

10-year Treasury yields ended the day unchanged at 4.471% and as we have stated for several weeks, from a technical standpoint yields want to fall, however due to an oversupply of debt to be sold, yields will continue to rise longer term. Tomorrow’s 10-y bond auction should provide some clues as to where yields are headed. Crude fell .21% today, remaining in its’ trading range while Gold was flat on the day, rising 4 basis points, back above $2300. We continue to buying dips in Gold and Silver. Bitcoin fell .21%, closing below $70,000 once again. We are buying Bitcoin on any pullback above $60,000.

In Friday’s newsletter, we continued to reiterate our model remains bullish above $530 and for today, it wouldn’t surprise us if prices traded as low as $532 and as high as $536.50. We stated the late day sell-off on Friday would lead to weakness early today with the market testing $533 and that we would buy this level. We also stated we expected the bull trend to resume in the afternoon session and sure enough, once again the model perfectly identified the morning sell off to $532.50 and the subsequent rally to $536. We provided the timing, direction, and levels to trade for the day. It does not get much easier than this, knowing well in advance what to expect from the market. If you are not using this actionable information in your daily trading, you are trading blind.

In the premarket at 8:07 am ET we stated we expected a challenged, choppy day with the market trying to reach $535.45 and that it would struggle along the way. We stated that $532.50 was buyable and to go long and hold for $534 to $535.45. We stated we liked short rejections of $534. And again, the short at the open to $532.50 with the long at 10 am to $535.45 presented perfectly, with another nice short opportunity as a bonus. Three great set ups for anyone who follows these reports. Again combing post and premarket reports provided levels to trade, a directional bias and where to enter and exit for profit. Create a daily plan of attack from this information and watch your confidence grow, along with your bank account. Trading is as much mental as it is knowing how to execute. Incorporating these market reports into your daily plan will help you gain actionable insight into the market each day. For further assistance, seek out one of our staff. 

Our model remains bullish above $530. Below $530 the market will likely experience profit taking which will initially reach $525, yet remaining above $518, the market is still solidly bullish. While we are now close to another new high in both the S&P and the Nasdaq, and while the market still has room to run in the bull trend channel that has been in place since the April lows, the market will need to digest lots of economic information this week, starting with the 10-y Bond Auction tomorrow. Not normally a big market mover, it could provide clues as what is to follow later this week. Certainly Wednesday is a huge day for the markets with CPI and FOMC, so expect the markets to go into consolidation mode Tuesday afternoon, preparing for the fireworks on Wednesday. Our model projects SPY will reach $540 before any material weakness develops.

Looking at a chart of SPY with our Market State indicator, the indicator is currently in a bullish trending market state and hasn’t rescaled since Friday. Clients who utilize this tool understand when the indicator rescales intraday with higher highs and higher lows, to expect a strong trend. But today the indicator remained unchanged, which implies a bullish trend but with a limited range. We said on Friday, this tool indicated today would be a trading range which is precisely what the market delivered. With price sitting in the upper-range of the indicator, we expect to see the upper boundaries tested on Tuesday…perhaps the lower as well, but given the strength of the market, it’s likely we simply rally to the all-time high and pause for Wednesday’s economic releases. This AI powered tool provides actionable information for traders of all types so learn how to use it properly to improve your trading. For more information, please contact one of our staff.

For Tuesday our model projects prices will trade between $531 and $539 (white box on chart), remaining fixed, which implies the likelihood of more range trading on Tuesday. Support is $532.50 with resistance at $536.85. The late day rally will likely continue heading into Tuesday morning with the market attempting to make a new all-time high. But our model sees any new high as being short lived with the market likely mean reverting back into a range of $533 to $536. We are bullish and recommend buying any dip, but would exit positions before the afternoon session, given the likelihood of sideways price action going into Wednesday. Of course make sure to take note of the bond auction at 1 pm ET should you still be in positions at that time. We will be flat after the morning session and watch to see if our Market State Indicator rescales to help us determine if there is anything worth trading Tuesday afternoon. For updates to this plan, be certain to check the Premarket Market report before the open.

Dealer positioning for Tuesday to the upside has Dealers buying $536 Calls, while selling $537 and $538 and higher strike Calls in a 2:1 ratio to the Calls they are buying. This implies Dealers expect new highs on Tuesday, with a ceiling of $538. It appears Dealers are convinced the market will make new highs before FOMC on Wednesday. To the downside Dealers are buying $535 and $534 and lower strike Puts in a 1:1 ratio to the Calls they are buying/selling. This implies should $534 give way, they expect prices to fall more significantly. But with Dealers balanced at 1:1, there is a low probability prices will fall on Tuesday, so expect higher prices and perhaps a new all time high.

Looking out to Friday, to the upside Dealers are selling $539 to $541 Calls in moderate size implying a max high for the week of $541. They are no longer buying any material quantity of Calls implying even if the market rallies on economic news, Dealers are confident the market will not exceed $541. To the downside Dealers are buying $534 to $528 Puts in massive size, positioned for a much more material sell off by Friday, should $532 fail to hold or the news be hawkish. These are the same levels our models have identified as major areas of support and resistance. Dealers are clearly concerned that while the market may very well reach $540 this week, there is also a high likelihood the market enters a correction phase and sells off more materially. We highly recommend you purchase protective Puts for any long book.

But as we state daily, Dealer positioning changes so be sure to check our Market Sentiment Newsletter premarket and review these post-market recaps to understand how dealer positioning will affect the day’s price action. Pre-market analysis is posted by 9:15 AM and these post-market recaps are posted each evening. We strive to deliver actionable intelligence you can use each day in your trading. Good luck and good trading.