Market analysis for July 18th, 2024

Welcome back traders! We had an O.K. day yesterday. I came close to a full profit on my NDX debit 0DTE but ended up rolling the put side at the last minute at a debit so I'll need to work that today. It was really scalping that hurt me the most. Apparently its not profitable to be bullish in a bearish price action. I'll try to be better today. Here's our results.

Let's take a look at the markets. Technicals have moved to bearish after yesterdays price action.

Technicals are tenuous enough that any decent sized move today could swing it either way. Another down day could break us below some substantive support and be very bearish. A decent sized up day and we could be right back to bullish.

Our short on the IWM yesterday via the micro futures worked like a charm. It and the DIA certainly seem overstretched here.
​September S&P 500 E-Mini futures (ESU24) are up +0.18%, and September Nasdaq 100 E-Mini futures (NQU24) are up +0.41% this morning, signaling a partial rebound from yesterday’s slump as an upbeat earnings report from Taiwan’s TSMC helped restore sentiment in the tech sector, while investors awaited a new round of U.S. economic data, remarks from Federal Reserve officials, as well as corporate earnings reports, with the spotlight on results from streaming giant Netflix.
In yesterday’s trading session, Wall Street’s major indices closed mixed. Spirit Airlines (SAVE) plunged over -10% after the carrier lowered its Q2 revenue guidance. Also, chip stocks declined due to concerns about tighter U.S. restrictions on chip sales to China, with ASML Holding NV (ASML) slumping more than -12% to lead losers in the Nasdaq 100, Advanced Micro Devices (AMD) sliding over -10%, and Nvidia (NVDA) falling more than -6%. In addition, Five Below (FIVE) tumbled over -25% after the discount retailer provided downbeat Q2 guidance and announced the resignation of Joel Anderson from his roles as President and CEO. On the bullish side, Johnson & Johnson (JNJ) rose more than +3% after the pharmaceutical giant reported better-than-expected Q2 results.
Economic data on Wednesday showed that U.S. industrial production climbed +0.6% m/m in June, stronger than expectations of +0.3% m/m. Also, U.S. June housing starts rose +3.0% m/m to 1.353M, stronger than expectations of 1.300M, while U.S. building permits rose +3.4% m/m to 1.446M in June, stronger than expectations of 1.400M. In addition, U.S. June manufacturing production rose +0.4% m/m, stronger than expectations of +0.2% m/m.
Meanwhile, the Federal Reserve said Wednesday in its Beige Book survey of regional business contacts that the U.S. economy expanded at a modest pace heading into the third quarter, with several regions reporting flat or declining activity. The report also highlighted modest overall price increases, alongside slight growth in employment. Consumer spending was little changed. Nearly every district “mentioned retailers discounting items or price-sensitive consumers only purchasing essentials, trading down in quality, buying fewer items, or shopping around for the best deals,” the report said. Looking forward, businesses anticipated the slowing to persist. “Expectations for the future of the economy were for slower growth over the next six months due to uncertainty around the upcoming election, domestic policy, geopolitical conflict, and inflation,” according to the Beige Book.
Fed Governor Christopher Waller said on Wednesday that the economy is nearing a point where the central bank can cut interest rates but noted he’d like to see a “bit more evidence” that inflation is on a sustained downward path. “While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted,” Waller said. Also, New York Fed President John Williams remarked that inflation data in recent months has been encouraging, but he requires more evidence in the upcoming months to gain the confidence needed to reduce borrowing costs. In addition, Richmond Fed President Thomas Barkin stated that the Fed requires more evidence that the disinflation process is sustained before cutting interest rates.
U.S. rate futures have priced in a 4.7% chance of a 25 basis point rate cut at July’s monetary policy meeting and a 91.7% chance of a 25 basis point rate cut at the September meeting.
Second-quarter earnings season gathers steam, and investors await new reports from notable companies today, including Netflix (NFLX), Abbott Laboratories (ABT), Blackstone (BX), Intuitive Surgical (ISRG), Marsh & McLennan Companies (MMC), Cintas (CTAS), DR Horton (DHI), Domino’s Pizza (DPZ), and KeyCorp (KEY).
On the economic data front, all eyes are focused on the U.S. Philadelphia Fed manufacturing index, set to be released in a couple of hours. Economists, on average, forecast that the July Philadelphia Fed manufacturing index will arrive at 2.7, compared to last month’s value of 1.3.
Also, investors will focus on U.S. Initial Jobless Claims data. Economists estimate this figure to stand at 229K, compared to last week’s number of 222K.
The U.S. Conference Board Leading Index will be reported today as well. Economists expect June’s figure to be -0.3% m/m, compared to the previous number of -0.5% m/m.
In addition, market participants will be anticipating speeches from Dallas Fed President Lorie Logan, San Francisco Fed President Mary Daly, and Fed Governor Michelle Bowman.

Our trade docket for today: /MNQ, DPX, NVDA, UAL, TSM, NFLX, ISRG, PPG, HAL, 0DTE's.

My bias today is neutral. Futures are showing weakness in the IWM and DIA which are very overstretched and strength in the SPX and NDX. Techs and Semis are coming back this morning. I think it all balances out to a lot of nothing. 

Intra-day levels for me:
/ES; 5652/5680/5701/5720*(key level. above here we break to new ATH) to the upside. 5637* (key level. This may be the most important level of the day. PoC and a huge magnet)/518/5609* (key level. 200 period M.A.)/5599 to the downside. 

/NQ; 20139/20238/20341/20418 to the upside. 20019/19995/19969/19889 to the downside. 

Bitcoin; While we had success with both our crypto 0DTE's yesterday it wasn't a great setup and we had very little capitial committed. Today may be more of the same. Bitcoin continues to consolidate in preparation of its next big directional move. 66,300 is resistance and 64,179 is support.

Lot's of earning plays today. I'll see you all in the trading room!