Market Insights: Monday, June 17th, 2024.

SPY opened down $.50 as our model suggested today would be a boring, range bound day without much movement either way. But as the markets do from time to time, they surprised our model and we saw all the major markets ripping higher with the S&P and Nasdaq making more new all-time highs. SPY closed at $547.10, up .80% while the Nasdaq closed up 1.24%, with the Dow gaining .49%, and the Russell following suit, up .84%. Today technology clearly led the way as the AI frenzy is still hot as ever. Volume for SPY was above average at 55.65 million shares reinforcing the bull case.

10-year Treasury yields also rallied given they have been falling for a few days, gaining 1.37% while Crude also rallied 2.75% to close above $80 for the first time in two weeks. Crude looks as if it wants to move higher toward $85. Tomorrow will be telling if there is any follow through to today’s big move. Gold fell .71% but remaining above $2300. We are buying dips in Gold and Silver. Bitcoin fell .12% and looks to be forming a base @ $65,000 for its next push higher. We continue to buy dips in Bitcoin above $60,000.   

In Friday’s newsletter, we stated we are bullish above $540 and recommended longs from $541.76 if this level held, and to look out for new all-time highs today. While we anticipated a range day and believed the market would have a tough time getting above $543, the market opened at $542.08, tagging our support level by 9:50 am ET and rallied to the $543 level, where it stalled for an hour before breaking higher and never looking back. Market Makers sold $545 Calls with a hard ceiling at $547 and the market blew through those levels as well, certainly costing the Dealers a pretty penny today. Fortunately with a long off support at $541.76, our clients long early enough to have a solidly green day. And those with our Market State Indicator saw the market rescaling higher in real time, indicating extreme strength and therefore knew to hold longs until later in the day. We also stated a failure of $539 would bring in $537 but that this was a low probability for the day and the market never got close to $539. We continue to stress every trader incorporate this actionable market information into their trading plan each day.

In the premarket at 8:30 am ET we stated the market was poised to move higher and that it was extremely likely the market would reach $543, with the possibility of hitting $545. We advised buying dips to $541 and to ride them, perhaps all day. In the premarket while there was a bit more visibility into the day, the model was materially the same as last Friday and as such, delivered similar advice. This is why we tell our clients to make a plan for the day, but to trade what you see. With the additional guidance our indicators provide, knowing what the market will do becomes much easier. For today we give ourselves a B given our model once again got the direction correct and the level to enter. But we did not see $548 in the cards in either the post or premarket…it happens…models are never more than 65% accurate which is why trading is challenging and requires training.

Our model continues to bullish above $542. Below $542 and the market will experience a deeper pullback. Bulls continue to control the broader markets and while today’s breakout was unexpected, this week we did prepare our clients for news highs to $550. We still believe $550 is likely the peak for this week, but the market is exuberant and as such, it could be setting up a parabolic, blow off top…or it could simply continue higher and higher. Until we witness weakness is big tech names, the market will continue to move higher. There is no top-tier news this week with just Retail Sales on Tuesday in the premarket. The markets are closed Wednesday so we do not anticipate any major move beyond $550 on Tuesday, as the market will likely go into consolidation mode for at least the day. Price is now in the upper portion of the bull trend channel from the April lows with a bit more room to the upside, yet there is plenty of room to the downside. We will see a 2% down day at some point within the next 60 days.

Looking at a chart of SPY with our Market State indicator, the indicator is currently in a bullish trending market state which rescaled higher three times today. As we tell our clients whenever this indicator rescales intraday, be prepared for a strong trend. This is especially true when it also prints olive extended targets with each rescale. If you look at the 2-minute chart on the left you can see how these olive prints kept moving higher until 12:45 pm when it simply printed a straight line at $548.78. Yet the market was at $545.45 when this occurred and sure enough, price moved just shy of our olive-colored extended target. Learn to use this tool properly and certainly the plan from the post/premarket is easily updated in real time, providing for much larger gains on the day. Having access to these tools, in our opinion, is critical to your trading success. Currently interim support is $545.43 with further support lower at $542.08. After reaching a high of $548.53 with the market selling off in the last 30 minutes to $547.10, and with the Market State Indicator staying fixed for several hours, it’s likely tomorrow is a bull day but with ranging price action with dips to $545.43 before moving back toward the extended target of $548.78. The Market State indicators provides highly valuable information so you know where to buy and sell and what the trend is likely to be. Continue to buy dips at support and expected generally higher prices on Tuesday.

For Tuesday our model projects prices will trade in a narrow range between $544 and $551 (white box on chart). This is a much smaller range than today’s expected range, which implies sideways trading on Tuesday. In a sideways or ranging market, stay with the longer-term trend and for Tuesday, continue to buy dips, taking profits near resistance. Buying dips to $545 and taking profits at $548 should be the plan for Tuesday. If $545 fails to hold, we advise buying $542 for a rally back to $545. The market may once again attempt to make a new high on Tuesday, although $551 looks to be quite challenging to get beyond for the rest of the week. Certainly a major failure of $540 and prices drop to $537. But this continues to be a low probability. For updates to these levels and the plan for Tuesday, be certain to check the Premarket Market report before the open.

Dealer positioning for Tuesday to the upside has Dealers selling $547 and $545 Puts while also selling $548 to $550 and higher strike Calls. This implies a hard ceiling at $550 with a floor at $545. Dealers are certainly positioned for another new high on Tuesday, but not higher than $550. To the downside Dealers are buying $544 to $542 and lower strike Puts in a size smaller than the Calls they are selling. This implies little fear of any material weakness on Tuesday, somewhat reinforcing our model’s prediction of a sideways, range bound bullish Tuesday. Market makers continue to position themselves for higher prices having removed much of their protection for tomorrow.

Looking to Friday, to the upside Dealers are selling $545 Puts while also selling $548 to $550 Calls in a 1:1 ratio to the Puts they are selling. This is bullish to $550. To the downside Dealers are buying $542 to $535 and lower strike Puts in a 10:1 ratio the Puts and Calls they are selling, implying should $542 fail, prices could drop much further and if this happens, Dealers will clean up. Dealers have sold Calls and Puts to finance the purchase of Puts so if the market gives way, they will do well. But at 10:1 they are coming out of pocket to protect from any material sell off by week’s end. While they clearly see this as a low probability event, they are playing it safe with the quantity of Put protection they have acquired so we recommend any long book do the same. This 20:1 ratio is the highest we have seen in some time.

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.