We still think 2960 in the ES is in the cards, but the bulls should look to reduce risk.
|We still think 2960 in the ES is in the cards, but the bulls should look to reduce risk.
The stock market refuses to go down until it doesn't.
We haven't given up on the idea of 2960 in the ES, or even 3030 if the good news continues to roll. However, we are at the point in which we see a greater risk of being "long and wrong" than we see upside potential. In short, if you made money on the way up, now is a good time to protect your gains or maybe even lock in some profits. On the flip side, if you are looking to play the downside the current prices are what we refer to as "nibble" areas. In other words, it probably makes sense to dip a toe in the water but we are far from areas that justify betting the farm.
We all know markets tend to take the escalator up and the elevator down. Further, they don't go up forever...so be on your toes!
Treasury Futures Markets
30-year Treasury Bond Futures
Treasury seasonals are mixed to bearish.
The economy is good, inflation is stable but ticking higher, the stock market is roaring, interest rates are still at historic lows. There are few reasons to be a Treasury bull in today's environment, but the only one that matters is decisively in the bull camp. Bonds and notes are being buoyed by money seeking safety and yield.
This makes sense because global monetary policy has created an environment in which the only way to achieve respectable yield is to either purchase US government backed interest rate products or accept substantial risk in the equity markets. In other words, investment dollars are keeping Treasury rates up not speculative dollars looking for an economic slowdown. Nevertheless, the trade will likely be heavy until the stock market finally goes into correction mode (which probably won't be immediate).
Treasury futures market consensus:
We are looking for the low 140s in the ZB and 121ish in the ZN.
Technical Support: ZB : 146'09, 144'20, 142'30 and 141'28 ZN: 122'21, 121'10 and 120'02
Technical Resistance: ZB: 148'19, 150'14, 152'28, and 115'16 ZN: 125'01 and 126'04
Stock Index Futures
SAME COMMENTS AS PREVIOUS NEWSLETTER: 2960 is on tap in the ES! Then what?
The ES is melting higher at the same time many commodities are melting lower. Unfortunately, when markets become one-sided as they are, the only thing that matters is liquidation and FOMO trading (Fear of Missing Out). Those buying and selling are doing so emotionally and the transactions have little to do with price, fundamental analysis, or even technical analysis. Eventually, the markets will work through this but in the case of the S&P 500 we doubt that will be before reaching 2960, but we feel like it will probably be before reaching 3030. In other words, the bears should look for opportunities to get "short" with hedged strategies between 2960 and 3030 (obviously, the most conservative entry would be 3030).
Stock index futures market consensus:
We have been relentlessly bullish and still lean moderately higher. However, the "easy" money on the upside has been made. Things can get rocky at any time, protect downside risk.
Technical Support: 2890, 2792, 2756, 2715, 2638, 2445, and 2358
Technical Resistance: 2960, 3000, and 3032
E-mini S&P Futures Day Trading Ideas
These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled
ES Day Trade Sell Levels: 2939 (minor), 2951 and 2962
ES Day Trade Buy Levels: 2923 (minor), 2907, 2889, 2873, 2862, 2850, 2815, and 2795
In other commodity futures and options markets...
September 12 - Roll the September Bloomberg Commodity Index into the December contract.
December 13 - Roll the December Bloomberg Commodity Index into March.
December 27 - Sell July corn 390 put and purchase the July 350 put for insurance.
December 28 - Go long July soybean meal, sell a July 320 call and buy a March 290 put for insurance.
January 2 - Buy the July coffee 115/125 call spread, and sell the July 95 put. Then buy the March 90 put for insurance.
January 23 - Go long the June euro currency future near $1.1520, then sell the May $1.15 call option and purchase a March $1.11 put for protection.
February 9 - Buy back the July 95 coffee put to lock in gain, then sell the July 102.50 put and purchase the April 100 put for insurance.
February 19 - Buy back July coffee 125 call and sell the April 100 put to lock in gains. Purchase an April 95 put to replace the insurance.
February 20 - Sell diagonal put spreads in wheat using the May 475 put and the April 460 put (about 11 cents).
February 21 - Exit half of the Bloomberg Commodity Index futures position (we added on a dip in January).
February 25 - Buy back the May natural gas 2.55/2.30 put spread to lock in a profit.
March 1 - Sell April wheat $4.60 put to lock in gain and replace it with an April $4.35 put.
March 7 - Roll short May euro $1.15 call into June euro $1.15 call to collect more premium and better our hedge. Purchase an
April $1.1150 put for insurance.
March 8 - Sell another June euro $1.15 call to bring in another 65 ticks in premium and provide a better downside hedge.
March 8 - Purchase May coffee 90 put replace expiring April put.
March 15 - Roll March BCI into June.
March 19 - Sell diagonal call spreads in cattle (sell June 128 call and buy May 130 call) to collect roughly 1.00 or $400 per lot.
March 21 - Exit May wheat spread to lock in a small loss.
March 21 - Establish a fresh position in wheat using a covered call (buy July future near $4.70, sell a July $4.70 call and buy a $4.00 put for protection) for a net credit of about 20 cents ($1,000).
March 21 - Sell diagonal call spreads in hogs (sell June 110 call and buy the April 85 call for insurance) for a net credit of about $940.
March 28 - Lock in a quick profit on the hog spread (roughly $400 to $500 for most clients depending on fill prices).
April 2 - Exit the long euro futures contract and replace it with a short June 112.50 put (then purchase a May 115 call and a May 111 put for insurance).
April 3 - Buy back short June cattle 128 call to lock in a profit of roughly $400 per contract (hold the long May 128 call in hopes of a rally).
April 9 - Sell July crude oil 69 call and then buy the June 72 call for insurance. The net credit should be roughly 60 cents, or $600 before transaction costs.
April 9 - Sell June hog 110/80 strangles and buy the May 107/69 strangles for insurance. The net credit should be close to $1,000 before transaction costs.
April 10 - Swap the May coffee 90 put for the June 90 put to refresh the insurance.
April 17 - Buy back one of the June euro 115 calls to reduce risk.
April 23 - Buy back hog strangle to lock in profit on this part of the trade (about $400 to $500 depending on fills (before transaction costs and prior to considering the open loss on a long strangle).
April 23 - Replace long ZM future with two diagonal put spreads (July 305/June 295).
April 23 - Roll euro strangle lower to rebalance (buy back June 115 call and 112.5 put and sell the 114 call and 111.5 put.
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