Market Insights: Wednesday, June 5th, 2024.
SPY gapped up today over $2.30 on weaker than expected ADP employment figures and initially sold off until it found support at $529 @ 10 am ET. The market then entered a relentless bull trend that didn’t give way all day with SPY closing at a new all-time high of $534.63, up 1.19%, reaching a new high of $534.69. Weaker employment will weaken demand which in theory will reduce prices and therefore inflation. Again something the Federal Reserve wants to see before cutting interest rates. The Nasdaq also rallied on the news to new highs, up 2.04%, while the Dow gained .25% with the Russell also gaining 1.53%. Volume for SPY was 41.42 million shares, which is respectable for June reinforcing this move to new highs.
10-year Treasury yields fell sharply, losing 1.09% to close at 4.28%. While we still believe yields will rise longer term, it’s more likely yields will drop below 4% before resuming their march to 5%. Crude gained 1.69% reversing yesterday’s losses to close just above $74,000, while Gold rallied 1.19%, still stuck in a trading range. We recommend buying dips on Gold. Bitcoin rallied .97%, closing above $71,000. We recommend buying Bitcoin above $60,000.
In Tuesday’s newsletter, we continued to reiterate our model remains bullish and we expected the market to move higher heading into Friday’s Employment report. We stated we expected today would be mixed with some early chop followed by a trending market. We suggested the market would attempt to mean revert before moving higher and to prepare for the market to make a new all-time high. We stated above $530 there was a solid probability of new highs. Finally we stated Dealers had a hard floor at $529 and continued to suggest buying all dips and riding positions for big profits. We often state the accuracy of our model, to the point where we get tired of restating the obvious. Our model routinely determines the type of day, the direction for the day and the levels where you should enter and exit trades. We can’t make trading simpler than this and anyone following today surely cleaned up, earning far more than the cost of our services. Our clients were long at 10:26 am ET and added twice to their long position, riding these into the close, earning over 500% on the day.
In the premarket at 8:27 am ET we stated the market would start the day a bit higher but find it challenging to exceeding $531.25. We also stated however, as the day progressed, our models saw higher and higher odds of the market resuming the bull trend and reaching $534. Just after the open the market hit $530.82 before falling to $528.73 where it reversed course and march strongly higher to $534.67. Once again, the mean reversion laid out in yesterday’s post market recap was updated in the premarket and the $529 level of support was reiterated with a long target to $534. These are trades we live for. And on a day like today where we laid out the perfect plan for our clients, trading becomes easy. Once again, the premarket Market Sentiment coupled with the post market report provided another actionable plan for the day. We highly recommend you learn to incorporate this information into your daily trading. For assistance, contact your trading representative.
We remain bullish above $518 while below $529 the model will likely experience profit taking which will initially bring in $525. Any failure of $525 will retest the $518 level. While we are now at a new high in both the S&P and the Nasdaq, and while the market has room to run in the bull trend channel its been in since the April lows, the market will likely pause between today and Friday in anticipation of the monthly Employment Report. On Thursday at 8:30 am ET Unemployment Claims will be released and should the number of claims increase, it’s likely the market once again rewards bad news and moves a bit higher. But the big market mover will be on Friday so expect sideways trading on Thursday with just a drift higher.
Looking at the 5-minute chart of SPY with our Market State indicator, the indicator is currently in a bullish trending market state, rescaling three times today in fairly rapid succession. Clients who utilize this valuable tool understand when the indicator rescales intraday, expect a strong trend and once again, the indicator predicted today’s strong move at 10:36 am. Presently the market is just shy of the model’s extended target of $535.42 and it would not surprise us to see this level reached on Thursday. But at that level it is likely to stall and take a breather heading into Friday. Remember this AI based indicator rescales in real time and having the tool as part of your arsenal can surely provide valuable information for traders of all types. For more information on this highly accurate AI tool, please contact your representative.
For Thursday, our model projects prices will trade between $530 and $538 (white box on chart), contracting a bit from today’s range. This implies the likelihood of a choppy day for tomorrow with resistance at $535 and support at $532. It’s likely the market exceeds today’s high but just a bit before entering into a range by Thursday afternoon. We do not expect any material sell off unless the market moves strongly below $533. We remain bullish and will continue to buy all dips. We do not expect another massive move higher on Thursday like we had today. A low volume day of consolidation is warranted and projected for Thursday with slightly higher prices. Be sure to check the premarket Market report for updates.
Dealer positioning for Wednesday to the upside has Dealers selling $535 to $536 and higher strike Calls, while also selling $534 to $532 Puts in an equivalent size. This certainly implies a hard floor for Thursday at $534 with a hard ceiling at $535…a very tight range which again, implies choppy trading. Positioning is light so looking to Friday may provide more clues from Market Maker positioning. To the downside for tomorrow, Dealers have little to no protection implying no concern about downside risk therefore they do not expect materially lower prices on Thursday.
Looking out to Friday to the upside, Dealers are selling $534 to $540 Calls while also selling $533 and $532 Puts. This implies Dealers believe there is the possibility the market will move higher by Friday to as high as $537. To the downside Dealers are buying $530 to $525 Puts in a 2:1 ratio to the Calls they are selling. This implies any break of $530 will lead to prices as low as $525. Dealers seems to less concerned about a stronger than expected Employment report and instead are anticipating more new highs on Friday.
And 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.
