Tickers discussed: SPY QQQ IWM FB AAPL AMZN GOOGL MSFT NFLX TSLA All SPDR Sector ETFs
Before the Bell is premarket prep for active traders. The note provides detailed stock market technical analysis focused on the indexes and FAAMGs. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade.
Earnings
Micron’s earnings tonight will be closely watched a s it is a bell weather for the Semi space. $BBBY is a meme stock that has the potential to move on earnings before the bell. H&M on Thursday should provide a good read on Global Retail.
Companion Video
The video is a detailed technical review of the indexes and FATMAAN names. All the key trading levels are identified along with commentary and trade plans for each ticker. Trade ideas are also discussed. Run the video at 1.25x to reduce run time.
Find the Video HERE
Seasonality Spike
The past 2 weeks mark some of the weakest seasonality on the calendar for equities. But guess what; it’s always darkest before the dawn. We now enter the historically strong first two weeks of July just before earnings season kicks off. Until I saw the graphic, I would have never guessed this upcoming 2 week period would historically strong. Although this factor gives a reference point for optimism, we dont trade historical averages, we trade charts. Keep that in mind.
Macro Data Releases Today
- Mortgage Applications 7am
- ADP Employment Report 8.15am
- Chicago PMI 9.45
- Pending Home Sales 10am
- Oil Inventories 10.30
- Fed Speakers Bostic at 8am; Barkin 1pm
Quarter End
The benign interest rate environment continues to favor tech shares as mega-cap tech and higher beta bubble stocks saw mostly higher prices. THe flip side of that is cyclicals / financials / energy / travel / reopening baskets. All traded poorly. You can easily see that in IWM that is rolling over to a certain degree. In addition to the interest rate story, the Covid variant story is building. Europe just instituted fresh travel restrictions on the continent. Also many countries / destinations like Hong Kong are banning flights from the UK. So that is also an emerging drag on re-opening trades.
Energy
Record temperatures in the West are driving NatGas demand as those with A/C have them cranked to the max. As mentioned the other day, NatGas has broken out of a big range and targets a move to the $4.50 range. NatGas inventories are tomorrow. Oil traders are closely watching the OPEC+ meeting tomorrow where it seems a production increase of 500K barrels is baked into the cake. Upside or downside surprises would likely move the market.
Precious Metals
The stronger dollar coupled with rising real yields make this a tough environment for gold and silver to perform. Of course time frame is everything. As we are relatively near support zones, there’s no problem is you want to nibble and accumulate a long position. Just make sure your time expectations are extended.
Quarter End Dynamics – Strategy
Today marks the end of Q2. That could bring quarter ending window dressing into play or added 2-way volatility or both. The past 2 days we’ve seen the VIX modestly rising even as SPY / QQQ were making modest advances. That is bearish divergence. Game Plan: If we get some kind of sizable up move to close the quarter, I’d take the opportunity to take some profits and reduce long exposure. Why? It would be so easy for them to ramp today, suck in a ton of chasers, then pull the rug over night. We’ve also got a big jobs report on Friday before the bell. Even if we don’t get some window dressing move today, I’d be inclined to lighten up.
Chart of the Day – SMH
Price is breaking from a big $35 trading range which targets $295 as a measured move target. Position traders can get long targeting a move 3 to 6 months out against say $255. THat would offer a 7 to 1 risk / reward trade which is excellent. As the trade begins to work you can ratchet up your stops.
INDEX CHARTS
A detailed walk-through of the levels and trading strategy for the indexes is given in the video ( link above) . The static charts are provided for reference. The FATMAAN names are also reviewed in the video along with trade ideas and other charts of interest.
SPY 2 hour
Yesterday we tagged our measured move target off the May double bottom low at $428. THis does not mean we cant go higher, it simply means we met a technical objective which is nice to see. THere might be something to this TA stuff. As we trade near the channel highs, traders need to be aware that even a simple pull back to the mid point of the channel would be near $425 and a fill of the downside gap would take price to $422.75. A run to the bottom of the channel puts price at $420.
SPY 30 min
QQQ 2 hour
Price continues to grind higher to ATH’s as the tepid interest rate environment is providing a fertile backdrop for both the mega names but also the semis, and more speculative sectors like EV’s and Solar. Stay long with price inside the channel. A break below would initiate a short -term sell signal. Bulls want to see a recapture of the mid-point line of the channel which would open the door for a run to the top of the channel.
QQQ 30 min
IWM 2 hour
As rates fade, traders fled the inflation / reflation trade dumping energy, industrials, financials and other reopening trades like cruise lines and airlines. Price needs to hold the line at $229 or $227 comes into focus with the 200ema ( 50ema on the daily ) just below at $225.
$IWM 30 Min
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