Week review · w/c 4 July 2022 · The worst first half since 1970, into the holiday and payrolls
The S&P 500 finished its worst first half since 1970 and still fell on the week, yet weekly value is shifting higher and the auction is now OTFU. Here are my weekly debrief and levels, the June monthly map, and a holiday week that ends with payrolls.
WK HIGH 3950 | WK LOW 3741.25 | CLOSE 3827.25 · 24-hour session
The week in brief
The US stock market rallied on Friday as it entered the long holiday weekend, but it still fell for the week, after finishing the worst first half of the year in decades on concerns about persistently high inflation, expectations of more aggressive central bank tightening, and recession risks. The Dow fell 1.3 per cent last week, the S&P 500 fell 2.2 per cent and the Nasdaq fell 4.3 per cent.
The S&P 500 had its worst first half of the year since 1970, falling 21%, while the Nasdaq had its worst first half ever, falling nearly 30%. The major benchmarks also suffered significant quarterly and monthly declines: the S&P 500 fell 8.4 per cent in June, while the Dow and Nasdaq fell 6.7 per cent and 8.7 per cent respectively.
Treasuries rallied sharply this week, with the 10-year US Treasury note yield falling below 2.9 per cent on Friday, on month-end effects and a flight to safety from declining growth expectations. Meanwhile, oil prices rose after OPEC and its allies agreed not to increase production above previously agreed levels, with West Texas Intermediate (WTI) crude rising to slightly more than $108 per barrel.
Check out the articles I recently wrote about trading into the holidays and what to look out for. As a bonus, I have added my article on how I trade events, specifically NFP. Developing this side of your game is a real edge!
The weekly structure
Weekly debriefDespite the whippy price action, weekly value is shifting higher, and the auction has left successive higher highs and higher lows post OPEX. The weekly and daily auction is now OTFU.
Buyers will be looking to push the auction above the non-excess high from Wednesday's auction, 3840, and repair the poor structure left over from Tuesday's liquidation trend day. Also on their mind will be protecting the buying tails carried over from Thursday's and Friday's auctions, 3746 and 3761 (spike base) respectively.
Sellers will be looking to end the OTFU by violating the weekly lows at 3741.
Why look at the weekly and monthly?Using the composite profiles gives me a lot of clarity in understanding the market. Understanding the story and the basic mechanics of what is going on simplifies almost every other aspect of my trading, especially timing.
By identifying areas of balance and acceptance in the auction, I have a natural edge: I can identify value and the pivots of change. In balance I look to fade the extremes. When activity leaves an area of acceptance, I monitor the strength and conviction of the move, using volume and value as my guide. As a general rule, if a move is genuine, volume and value will move away from prior acceptance to a new area.
Monthly profilesThe weekly profiles look a bit messy and confusing. Being month end, I have focused on the prior months' profiles to understand and identify the key areas to trade.
On the HTF price map: the month's highs at 4177.75 and the month's lows, the peak HVN, 2-way trade inside each distribution, the pivot, the gap from 4016 to 3959.5, and the poor structure left from an emotional few days post balance breakout. Repair 3944-4067.
Levels for next week
Levels marked on the weekly profile review, above and below. Buyers want the auction above the non-excess high at 3840; sellers want the weekly lows at 3741.
MonthlyMulti-distribution.
- H 4178 | L 3639 | VPOC 3774 & 4116 | MID 3906
- 3-month VPOC 4116
Data ahead
4th July holiday leading into payrollsThe labour market will be in the spotlight next week, with the Labor Department's June nonfarm payrolls report on Friday. Other labour market reports, such as the Job Openings and Labor Turnover Survey (JOLTS) and ADP's National Employment Report, which tracks private-sector payroll growth, will provide more information on the labour market. On Tuesday, international PMI surveys tracking business sentiment in the United Kingdom and the eurozone will be released. The minutes of the FOMC's most recent policy meeting, held in mid-June, will be available on Wednesday. It will be a quiet week for corporate earnings before the second-quarter earnings season kicks off in mid-July.
Key takeaways
- On Tuesday, the Bureau of Labor Statistics (BLS) will release its Job Openings and Labor Turnover Survey (JOLTS) report for May.
- International PMI surveys tracking business sentiment throughout the UK and eurozone will also be available on Tuesday.
- Payroll provider Automatic Data Processing (ADP) will release its June National Employment Report on Thursday.
- The Labor Department's June nonfarm payrolls report will follow on Friday.
Events calendarSource: Investopedia.
- Monday, July 4: US market holiday (Independence Day).
- Tuesday, July 5: Factory Orders (May); Eurozone S&P Global Composite PMI (June); UK S&P Global Composite PMI (June).
- Wednesday, July 6: S&P Global Composite PMI (June); ISM Non-Manufacturing PMI (June); JOLTS Job Openings, Quits, Separations (May); FOMC Meeting Minutes (June policy meeting).
- Thursday, July 7: Levi Strauss (LEVI) reports earnings; ADP Private Payrolls Report (June); Trade Balance, Export and Import Growth (May).
- Friday, July 8: Nonfarm Payrolls Report (June); China Inflation Rate (June).
Weekend reading: awareness as an edgeAs a macro-driven trader, I try to keep abreast of other themes that can drive risk repricing events. Ultimately, just having a broad understanding of risk triggers is one of the greatest edges. Oil, yields, politics and other triggers are an important part of my daily and weekly prep. I've included some general pieces I will be looking through over the weekend: 'Is inflation peaking?' and an oil outlook by Danske. I've also included a video I released on how I executed my trades on a comment regarding a Russian withdrawal from Snake Island.
Some interesting research from me this weekBTW, I don't care too much for stats like these, but they are interesting. I only trade the auction. From Twitter: ES and the month of July returns under a bearish regime. The 4th of July weekend trade is not much better; this was posted earlier. Hopefully everyone has proper risk management, which is what being a trader is all about. Have a good weekend all, and thank you for the support.
Key tweets
ES and the month of July returns under a bearish regime. The #4thofJulyWeekend trade is not much better, this was posted earlier. Hopefully, everyone has proper riskmanagement which is what being a trader is all about. Have a good weekend all and thank you for the support.
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Key lessons
Trade well and prosper.
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