First, let me alert you that this will be the only Pre-Market Outlook this week. The wife and I are packing to head to California for a few months before permanently returning to Europe.
Look, I have used every excuse I can come up with to get out of helping with the packing and moving. I feigned doctors’ appointments, errands, market commentary to write – anything and everything to avoid packing. I am such a good husband; I even offered to fly ahead to sweep and get the house ready!
But alas, I have run out of excuses. So, packing and driving are all I am doing for the next few days—happy wife – happy life.
These commentaries will resume on Tuesday after Labor Day weekend. Obviously, I will communicate any material issues or changes in strategy.
Also, I am excited to say that the programmers will finally have the new website features, including the live trading room, turned on by then. The programmers need this downtime to get everything ready now that the beta testing is over.
We are approaching a six-figure investment and nearly six months of work in all this infrastructure, so I am looking forward to making it operational. At times, it has seemed like a bottomless pit of expense and frustration.
Today’s Plan
I am sure nobody is happy to see a hurricane this week except President Biden. It takes Afghanistan off the front pages, at least for a time. But the only news that matters to traders right now is Friday’s commentary from the Fed. Bottom line – the music will play on a while longer.
I have eyes on the IWM, XHB, XLE, SPY, and QQQ for opportunities. Health care (XLV) remains an opportunity on dips. Even better, keep an eye on Biotech (IBB). Also, look at the top 10 holdings in each of these ETFs for stocks. The patterns often mimic the ETF. Usually, half or more of the cap weighting of the ETFs are in the top 10 holdings. You can trade these just as easily as futures if you are careful with weekly or monthly options. More on this when I return.
Back to our core trading vehicle, the E-Mini, we could open a small, true gap higher so Gap Rules may apply. You can see from the profile chart above that the overnight profile is symmetrical and balanced, though we tagged new, all-time highs. Overnight traders are net-long, so there should be a gap fill or small profit-taking dip on the open. If not, that is important M.G.I.
Always remember, on a major Fed day like Friday, the initial gains are short-covering. Nevertheless, we will look to buy dips on the intraday charts. But what we really want to see is acceptance of these new prices and follow-through. Overnight traders were unable to drive prices much into Friday’s range, making it appear that there are not too many sellers present here yet.
Maintaining prices (acceptance) this morning above Friday’s regular session high at 4410 would be extremely bullish. If we need to digest Friday’s gains, I could tolerate a dip down to Friday’s halfback at 4492, where the “emotional” single prints begin.
A good long trade presents when the market rises back up through the open, preferably after a slight dip. I would be surprised to get as low as 4492, but it could change the tone if traders cannot maintain that level.
Having now conquered the roundie at 4400, the round number should provide support and coincidentally is close to the Globex low at 4401. If the trend is strong today, you could hold a buy around 4400 until lunch.
Monitor internals to help predict the probability of a trend day.
Good luck this week; it tends to be a slow volume week as most of Wall Street is spending their last week of vacation in the Hamptons – except me.
A.F. Thornton