SP500 long and stable to start the week

٢٩ يناير ٢٠٢٣

The ES outlook looks very similar to the NQ, except the ES appears to be more stable (surprise, right?). The VIX is the same, with room to run higher. However, the VIX does not show there is a lot of room to run. Also, I am not subscribing to the bear market being over. I would need to see solid support on or above the hard resistance line to begin to buy into that theory.

Of course, I could care less about that theory because the market does not have to go up or down for me to trade it successfully. It’s just nice to know which way the tide is going, up or down.

There are big earnings on tap for Thursday (2/2/2023) in AMZN, AAPL, and GOOG. Those are stocks that heavily weigh into the ES. I think price will go higher, hit the fail point in the target zone, and then retrace to new support. All that will happen by Thursday.

Depending on how those stocks report, will determine the next move of the market. MSFT and TSLA both reported near projections. If the Thursday stocks do the same thing, then the effects of those reports will be priced into the market. I look for Friday to either be very volatile or have Vanna/Charm coverages from the options market makers.

This analysis is bolstered by both options flow of the SPY and the CFTC CoT report.

On the options, there are large calls purchased on the SPY's correlated prices, signaling that a large player in the market is expecting price to rise.

A.10,000 calls bought (long a call) in 24 executions through 9 exchanges with an expiry of 2/2/2023 (earnings day).
B. 6430 calls bought at 410 strike expiring 2/1/2023.
C. 3145 calls bought at 410 strike expiring 2/1/2023

Looking at the CoT report, as of Friday (1/27/22)

Hedge/speculation funds and large retail traders were long in the ES1!. While the options in the NQ were showing puts bought were higher (substantially) than calls bought, the CoT shows both banks and speculators are long. On the futures options, the numbers indicate long and close the gap between banks and hedge funds.

ES shows long. NQ shows volatility (nothing new there). I am keeping a solid stop in place on NQ trades as it looks like it could get western in a hurry. If NQ falls, it will fall to the low HVN and the bottom of the chart is not a sure thing.