Recession who? RIP bears...

July 20, 2023

What’s up traders. Back with another market brief on our new posting schedule — Sunday, Tuesday, and Thursday.

Our team is growing very fast so expect more value-packed content across all of our media channels, and exciting new trading tools.

Without further ado, let’s dive right in…

Impact Snapshot

  • Earnings of the day: JNJ, AAL, BX, ISRG, FCX, CSX, NOK, TSM

  • U.S. first-time unemployment claims fall to lowest level in nine weeks

  • Philadelphia Fed factory index in negative territory for 11th straight month

  • U.S. existing-home sales fall in June to lowest level since January

Market Evaluation

Listening to financial news can be counterproductive. 

Since the start of the year, many investing firms called out of the coming “recession”. The market has rejected almost all forecasts. Fast forward to today’s market, SP500, DOW, NASDAQ are making new year highs. You might question how can this be? What is fueling such a run with no major pullbacks? The long term management funds were betting in that upcoming “recession” since the start of the year, over weighting their positions in that information and were positioned on the short side. Meanwhile, retail and CTAs continued to buy on better-than-expected reports related to cooling inflation and better than expected earnings. After the successful breakout of 4500, this rally to the upside was further fueled by long-term short covering. Simply put, if the market is too short, it strengthens the market. The higher the market went, the more pressure that put on the long term money managers, especially above 4500, so what you are witnessing right now is a forced buying to cover those shorts and adjust their portfolios.Short-term short covering happens all the time in LTFs, what doesn’t happen often is the long-term short covering on HTF. What you are experiencing right now is not normal and you will likely not experience this current market many times. These imbalances occur in all time frames, you just don’t have large sizes like that on the longer time frames. Once the short covering rally is completed, it weakens the market because it removes that forced buying power support, and it will.

Closing recap 7/19

On yesterday’s ON session plan we’ve posted on Twitter here, we’ve emphasized the importance of holding the support of 4585 which we successfully did so which fueled a rally to the next target area of 4610, after RTH session opened with a gap to the upside from our exact support level. During the RTH session, we’ve pulled back to the key zone of interest at 4594 after another attempt to breakout reached another new year high at 4609 which rejected the buying side pressure and sellers pushed the prices down to the support of 4594 which price re-tested and ranged above several times until the market’s close.

The Day Ahead

The ON session plan we’ve posted on Twitter here showcased the key area of support at 4585 and the importance for tthe bulls to hold above for the continuation. We’ve tested this level on the ON session and brokedown before the RTH, which opened with a GAP down that was quickly filled after the open, and found the first resistance zone at 4594 which was the first target to claim for the move up as we’ve wrote in the ON session report. Losing the key zone of support lead to new lower lows, introducing weakness to the current session with pullback zones to look at in order for an attempt to re-claim 4585 and then continuation at 4594 and 4603. 

The levels we observe until NY close:

  • Main pivot: 4585 ( Need to reclaim it as support)

  • Upside Targets: 4594,4603

  • Downside Targets: 4570,4561,4551

For further continuation we got the levels to observe at the higher time frame chart above. 

Disclaimer: Futures and options trading carries a significant level of risk and may lead to substantial financial losses. The content provided in this newsletter is solely for informational purposes and should not be construed as a trade recommendation or financial advice. It is essential for readers to independently assess and make their own investment decisions, taking into consideration their personal financial situation and risk tolerance.

That’s all we got for you. We’ll see you in our pre-market report on Sunday.

Have a great weekend!