Market Insights: Monday, June 24th, 2024.
SPY opened down $.18 trading lower and finding support at $543.71 by 9:45 am ET, when it reversed hard, rallying to the high of the day of $546.95. SPY then traded back down to $544.66 before bouncing once again back to $546. SPY chopped around for a few hours until the market finally picked a direction in the afternoon session and sold off to $543.50, where it bounced a few times before a late day sell off to close at the lows of the day at $542.74, down 33 basis points. Profit taking continued in most Mag 7 names with NVDA losing over 6.68%, NFLX dropping 2.49%, AMZN dropping 1.86%, with GOOG, MSFT and TSLA also falling a bit. META, and AAPL were slightly higher. We continue to watch this group for clues about the market’s next move. The Nasdaq fared worse than SPY losing 1.15%, with the Dow up 67 basis points and the Russell gaining .43%. With money coming out of the highfliers but finding its’ way to underperforming assets, it’s likely this is nothing more than a rotation with some profit taking and repositioning. Volume for SPY was average at 44.49 million shares.
10-year Treasury yields fell 63 basis points with Crude popping 1.28%, back above $81 while Gold gained on Bank of America citing Gold will reach $3000 this year, rising .49% and holding above $2300. We continue to buy dips in Gold and Silver. Bitcoin got slammed today losing over 6.22% closing just below $60K for the first time since early May. Major support for Bitcoin is $56,500. We recommend a hold on Bitcoin with its close below $60K. We recommend a wait and see approach to how Bitcoin reacts to this sub $60K level. Should $56,500 fail, the next major level for Bitcoin is $50K. Above $60K Bitcoin is bullish, below Bitcoin is a hold. We are bearish Bitcoin below $50K.
In Friday’s newsletter, we reiterated our model remains bullish above $542 and to watch Mag stocks given if they falter, the broader market will follow, which is exactly what transpired today. We stated that the high from last Thursday was likely in for at least a few days and without any major news catalyst until Friday, the market would chop around delivering more ranging price action. We got that for much of the day. We stated we favored longs off $543 to $545 but that it was possible the market would attempt early on to reach $548…we got to $546.95, bouncing off $543.75 after the open. We also stated to watch for any failure of $542 which would bring in lower prices….a low probability for today but one that is rising from last week. Knowing the levels to trade and in what direction takes the guess work out of trading. We recommend you incorporate our actionable information into your trading plan each day to help you trade profitably over the long term.
In the premarket at 8:15 am ET we stated the market looked to be bullish early on, rising to $547 with a max downside of $542.50. We suggested today would be choppy but with progress upward in the morning session and recommended longs from $543.50 to reach our upper targets. We stated rejections of $544 would bring in lower prices to $543.50 where we would initiate longs. And virtually to the penny, in the morning the market found support at $543.50, rallied to $547 before falling back below $544 for a short to $543.50, where longs were initiated back to $545. Once $543.50 failed to hold late in the day, our lower target of $542.50 came into play virtually to the penny, where price found support, close at the lows of the day. The updated premarket plan once again played out perfectly and if executed properly, paid handsomely. Having this updated, premarket information coupled with the post market report from Friday made the day easy to read for material profits. These summer trading sessions can be challenging, especially at these elevated levels. Why not equip yourselves with this actionable and highly accurate information to make your trading life easier and more profitable.
Our model remains bullish above $542. Below $542 the market will experience a deeper pullback to at least $540. There continues to be broadening of the bull market with the DOW and Russel starting to catch a bid. We continue to believe the all-time made last week holds for the remainder of the week and while SPY bounced nicely again today off the lower trend channel in place since the end of April, closing on its’s lows at the trend channel could present additional short-term weakness, breaking trend. There is an unfilled gap from June 11th which would make a realistic target at $537 should $542 give way. Yet above $542, we continue to believe the market will resumes its push higher, which we may see as soon as tomorrow. There is no material news on Tuesday which will move the markets. Friday’s PCE report will have an effect on the market so again, the probabilities favor more choppy price action this week trading in a range between $542 and $548, the high we expect to see this week.
Looking at a chart of SPY with our Market State indicator, the indicator is currently in a bearish trending market state with prices below the lower support level. There is an extended range target below of $541.26 which certainly is in play. Support which is now resistance is $543.02 and higher resistance at $544.78. As our clients know, in a bearish trending state we favor selling resistance and taking profits at support. This bearish range however is quite narrow so probabilities favor more ranging behavior than trending behavior. The late day sell off however could change the indicator state in the morning. We plan to watch for clues from this tool after the open. The indicator today rescaled to a ranging state at 9:52 am ET which set up the perfect long to our $547 target mentioned above. In a ranging state, we buy the low support levels and sell the highs. The indicator then rescaled back to a bearish trending state at 1:08 pm ET and our clients knew to short to $543.50, again identified in the premarket report. With the late day selloff and a close near major support, for tomorrow we recommend watching the premarket session to see if $542 will hold. If it fails, we recommend shorts to $541.25. Adding this tool to the information provided in our newsletters makes it quite easy to understand what the market is doing or about to do each day. Should price break the upper resistance level of our Market State Indicator, we favor longs back to major resistance at $548. should $544.78 upper resistance hold, we favor shorts back to $543.
For Tuesday our model projects prices will trade in a range between $543.50 and $545.50 (white box on chart), which is an extremely narrow range. This implies nothing but ranging price action for Tuesday. Yet with price currently sitting at $542.74, below this range, there is a risk prices may fall further toward $541.25. That said, probabilities favor a rally overnight with SPY moving back above $543, in line with the model’s projections. The market will likely test this $543 level a few times by trading as high as $545 and selling off to retest if the $543 level will hold or give way. Given the precarious position of price being at the dividing line between bullish and neutral, using real time tools like our Market State Indicator becomes that much more important. Currently we no longer favor longs unless price breaks $545 or reaches our extended target at $541.26 where we will initiate a mean reversion long to $543. Otherwise we favor shorts from overhead resistance. There is little chance the market attempts any new highs on Tuesday. When the market does break out from this $542 to $545 range, probabilities continue to favor a breakout higher, although for Tuesday, this is highly unlikely. Again a failure of $542 will see prices drop to $541 and perhaps close the gap to $537, where its’ likely the market finds support and fails to move lower. For updates to these levels and the plan for Tuesday, be certain to check the Premarket Market report before the open which will update from overnight Futures price action.
Dealer positioning for Tuesday to the upside has Dealers selling $545 to $550 and higher strike Calls, while buying $543 and $545 Calls in small size. This implies Dealers have a bit of optimism the market will rally slightly on Tuesday, but no further than $545. To the downside Dealers are buying $542 to $540 and lower strike Puts in a 1:1 ratio to the Calls they are selling. This implies little fear of material weakness on Tuesday. With such a balanced book, Dealers seem to think the market will simply trade sideways on Tuesday, between $542 and $545, reinforcing our model’s predictions. While we believe the potential exists for slightly higher prices, $546 is likely the top for Tuesday and $540 is likely the low, should $542 give way.
Looking out to Friday, Dealers are buying $543 to $546 Calls, while selling $547 to $550 Calls implying the all-time high will not be breached this week, but that Dealers certainly expect the market to move higher later in the week. To the downside Dealers are buying $542 to $535 and lower strike Puts in very large size, protecting against any major pullback. Dealers understand the market has not had a 2% sell off in over 330 days and with a record of @ 350 days, the market is due for a bad day soon. But should any sell-off develop, it’s likely to be short lived or not occur until later in July given historically, the first two weeks of July are seasonally the most bullish of the year. Dealers are certainly positioned for a sell-off should it develop this week, but at the same time, are positioned to participate in a rally back toward $548.
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.
