Market Insights: Tuesday, July 2nd, 2024.

SPY gaped down $1.64 but quickly found support at the low of the day at $543.65, closing the gap by 9:40 am ET. Prices chopped around until 10 am when the market decided Powell’s optimism about inflation coming down would eventually lead to cuts in interest rates. The market turned decidedly bullish and traded up and to the right for the rest of the day, closing up .67% at $548.98. All Mag 7 stocks rallied with TSLA leading the pack, up over 10%. NVDA suffered a bit of profit taking, dropping 1.31%. As to be expected with Mag stocks rallying, the Nasdaq gained 1.01% closing just shy of its’ all-time high. The DOW rallied .41% with the Russell also gaining .33%. Volume for SPY was lower than average at 34.86 million shares, but in line with a shortened holiday week.  

10-year Treasury yields eased down .87% with Crude pulling back .42%. Gold was flat, losing 4 basis points as we continue to buy dips in Gold and Silver. Bitcoin too pulled back a bit, dropping 1.51% to close just below $62K. We remain bullish Bitcoin above $60K.     

In Monday’s newsletter, we continued to state our model is bullish above $542. We recommended longs off $543 given the strength of this level with it holding for 8 days in a row. We also suggested taking profits at $545 and reversing short at this level, trading the range between $543 and $545. We expected chop in the morning session which is precisely what we got. We were long at the open to $545 and reversed short back to support. We advised clients to watch the market’s reaction to Powell’s remarks given his words move the markets. We stated if price held above $545 on volume, to expect the market to rally to as high as $549 and recommended buying $545 if this developed. And to the penny, $545 did hold on volume @ 10:15 am ET and moved up, providing a second opportunity to go long at 12:10 pm when it retested $545.13. The market then moved straight up reaching a high of $548.97. Our model once again delivered the perfect plan from the open for a solid long, a breakeven short off $545 and a reversal long for a monster trade from $545 to just shy of $549. We continue to provide clients with actionable and accurate level to level trading suggestions which play out perfectly virtually every day. Once again, it doesn’t get any easier than this. In fact our staff trades our model’s recommendations with their own accounts and today they were long ES Futures overnight from $5515 and closed the trade at $5555 for a $40 ES Future profit ($2000 per contract). We follow our own advice and suggest you do so as well.       

In the premarket at 8:37 am ET, we stated the market had slipped overnight and to retain its’ bullish outlook, $545 needed to hold. We suggested buying support at $542.50 and trading to $545, shorting rejections of this level. We also stated it was possible that a rally today would potentially move the market to a new all-time high, should $545 hold. Again, premarket information which was virtually identical to the post market recap, reinforcing the model’s view of the day. As we stated yesterday, for us this becomes an “all-in day” where we trade in size and look to bank major profits. Reviewing both newsletters provides traders with an actionable trading plan, which when coupled with the Market State indicator, adds real-time information to allow traders to profit handsomely from our model’s predictions. Every guru will tell you they are not in the prediction business. Of course they aren’t…when you make a prediction, its easy to be proven wrong. We put our money where our mouth is every day providing you with actionable level to level trading advice. We ARE in the prediction business.    

Wednesday is a half day and we expect very low volume and choppy price action. While our model continues to remain bullish above $542, below $542 the market will experience a pullback to at least $540. With the market within a whisper of the all-time high, it’s possible we break this level on Wednesday. $543 has held for 8 days and today’s rally moved price back into the trend channel that has been in place since the end of April. We mentioned yesterday below this channel we would need to redraw it. Well that is not the case and it’s likely the bull trend continues to new all-time highs either this week or next. We expect a sloppy, choppy Wednesday given it’s a half day and recommend most traders take the next two days off. Thursday the markets are closed. Friday the Jobs report will be released, which will create some volatility for the markets. But it’s a short holiday week and many professionals are already on vacation. We wouldn’t blame anyone for calling it a week. Wednesday ADP and ISM PMI are being released along with Fed minutes after the markets close. Friday at 8:30 am the Jobs report release will likely set the tone for the markets’ next move.

Looking at a 2-minute chart of SPY with our Market State indicator, the indicator is currently in a bullish trending market state with prices above the extended targets at $548.85. With the late push to close at the highs of the day, after a monster move like today, it’s likely the market will attempt some follow through in the half day session on Wednesday. There is also a 40% chance the market will mean revert back to support at $547.72. Below $547.72 the next level of support is $546.57 where we would recommend longs back to resistance. Our model projects the range for Wednesday to be $546 to $549 (white box on daily chart), narrowing significantly given the half day. This implies more chop with little price movement either way. Again we think a fade of the all-time high has a 40% chance of success, should prices get there on Wednesday. But we won’t be trading tomorrow given we expect nothing but chop. The Market State Indicator today rescaled higher several times and printed extended targets (olive lines) which gave users clear evidence today’s trend would be strong. When this occurs, users know to stay with the trend until the indicator stops printing new levels. We have stated several times, anytime this indicator rescales quickly, this implies a strong trend, particularly if it also prints extended targets. These extended targets are only generated when the “herd” is jumping on the trend and probabilities favor a strong continuation of the trend.    

For Wednesday probabilities favor the market attempting a push higher but also providing an opportunity for a mean reversion short to at least $547.72 and perhaps $546.57. We favor longs off $546.57 should the market drop to this level. We have stated for a couple of weeks, the first two weeks in July are the most bullish of the year and a breakout above $545 would lead the market significantly higher. Nothing in our view has changed for Wednesday except the levels to trade. For updates to these levels be certain to check the Premarket Market report before the open.  

Dealer positioning for Wednesday to the upside has Dealers selling $548 Puts while also selling $550 and higher strike Calls, implying a ceiling on Wednesday of $550, but also a floor at $548. Market Makers are selling Calls in a 10:1 ratio to the Puts they are selling. Their positioning implies a very tight range on Wednesday given the half day, with a low of $548 and a high of $550, in line with our model’s predictions. Dealers do not typically sell Puts without confidence that prices will at least hold a level. To the downside Dealers are buying $547 to $540 and lower strike Puts in a 3:1 ratio to the Calls they are selling, not overly concerned about downside risk for Wednesday. Should $548 fail, it’s unlikely, based on Dealer positioning, the market will move significantly lower.      

Looking out to Friday, the day after a holiday, Dealers are selling $550 to $553 Calls in large size, implying a belief the market will move higher by Friday, making a new all-time high, but likely capping any break to the upside at $553. To the downside Dealers are buying $549 to $540 and lower strike Puts in a 3:1 ratio to the Calls they are selling, implying just a bit of concern of lower prices into Friday. We continue to reiterate the market has not had a 2% sell-off day in 341 days and with a record of 377 days, the market is due for a bad day. But it will not likely develop until the end of July. We recommend continuing to review this plentiful and actionable information each day, learning to incorporate it into your daily trading plan.     

Dealer positioning changes each day, 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. Given the holiday, we will not publish a post market recap tomorrow or Thursday. We suggest reviewing the premarket report Friday morning for clues for a plan of attack for Friday. 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.