ES-
SUPPORTS= 7715-7697-7684
RES= 7739-7757-7776
NQ-
SUPPORTS= 29879-29832-29793-29682
RES= 29930-30015-30106
ASSUMPTIONS=
PIVOT 7724
SPY(FOR THE WEEK)-
SUPPORTS= 760.53-758-755-752-749.34
RES= 763.57-767.51-770-772
QQQ(FOR THE WEEK)-
SUPPORTS= 718-713.22-711.39-707.77
RES= 722.44-725.74-728.62-732-735
AMZN:
A roller coaster here after the earnings gap up from 240 to 260, followed by a push into ATHs that eventually faded after Bezos scheduled a sale, which has historically put pressure on momo when AMZN breaks out.
Since then, AMZN has been trending lower in a roughly one month channel. On Friday, it closed above the channel and Wednesday it held the 200 day.
I am going to watch how 250 reacts to start the upcoming week. If 250 can hold, I think the 260C for October 16 could be in play, with the 255C for 0DTE also worth watching.
If 250 fails, I am looking back toward 243 and the 200 day. In that scenario, the 245P for 0DTE could be in play.
BIDU:
Might be one of the harder China names to trade, but also one of the more explosive ahead of the Trump and Xi meeting this week on September 23 and 24. The summit is scheduled for September 24, with trade, AI, critical minerals and broader US China relations expected to be key topics.
BIDU and Chinese equities have had a major fall from favor over the last few years, so this week I am watching to see whether any progress is made toward improving the US China relationship.
Even if nothing major comes out of the meeting, I think there is potential for a buy the rumor, sell the news setup, which is another reason BIDU makes sense to watch given how explosively it can move.
The trade I am watching here is the 95C, which saw roughly 1.6K volume on Friday while the rest of the chain was essentially untouched.
If 88 holds into the meeting and China wakes up, I think a 90 break could open the door toward 95 to 99.
With the calls around 0.38, I think the risk to reward could make sense as a spec play.
If 88 breaks, I would consider the thesis wrong and would not want to force the trade.
NOTE=
"Good day." Those were the words that echoed across the markets this week as Warsh walked out and changed policy for the first time in three years, coming out to hike rates by 25bps. It was a unanimous vote and it seemed priced in, as markets rebounded off the news and made new weekly highs into end of week and opex.
The Fed
The main driver was yields dropping, with the 10y and 30y coming down initially. That was the big thing to watch and it allowed markets to drag higher into the close. By Friday, though, the 10y was back at 5 and the 30y was back at 5.33. The long end stayed down more than the short end, but that move in yields was the main event this week and it allowed markets to bounce post hike.
Bank of Japan
We also got a BOJ hike, which spooked markets, as Japan is now at 31 year highs. My main takeaway from that meeting was the quote: "will continue to raise the policy interest rate and adjust the degree of monetary accommodation." The theme made clear in Japan was that they are still hiking, but the near term message was not rushed. Hikes are still likely, but they will not let markets overshoot target. Call it "hawkishly dovish."
The Thesis (2023 Analog)
I want to stay on the same thesis I have carried. That is the 2023 analog: hike occurs, markets do not react, and actually finish green. We saw exactly that on Wednesday for FOMC.
The second part of the thesis is a push higher into opex before we run into turbulence and a skid. That part is still to be determined, but now that opex is over, the window of weakness is opening up. If we do not start to see selling by September 23 or 24, or by end of week, I would consider this the wrong read. In 2023, after the hike, we closed the month okay, then went into a 9% skid into October, followed by a bottom and a 16% move off the lows. I think a smaller scale version of that can happen here if the window opens and flows allow the downside.
So the read stays the same: run into issues at the end of September, sell into the November midterms, then find footing and rally into December as the Iran situation ends.
Iran and Oil
Iran seemed to be front running the end of the conflict this week. Oil sold over 10% as Iran was granted a visa to attend the UN summit. Everything started to look constructive, as if oil was pricing in a ceasefire.
Then over the weekend, Iran issued a "Code 100," its highest level of security. It was triggered after Yemen launched ballistic missiles, cruise missiles, and drones at "sensitive sites" in Riyadh.Saudi air defenses intercepted a missile aimed at Riyadh, and smoke and fire were reported near King Khalid International Airport's fuel tanks. This was the first strike on the Saudi capital in the latest flare up of the Houthi and Saudi fighting. That raises tension in the Middle East and now becomes a problem. If this Code 100 escalates, or LNG sites are hit again and flows on the east to west pipelines are disrupted, oil could spark a rally and run into problems once more.
I still think a ceasefire is on the way. The unanimous Fed decision made it clear they will keep hiking if inflation is not controlled, and the main driver of that is oil prices. I think Trump knows the only way to stop the Fed hikes is to stop the war in Iran, and this would be a good time to do it ahead of the midterms, with President Xi arriving this week and Iran getting its UN visa. He and JD Vance also said it would end after the midterms, which keeps the thesis intact: sell off post opex into the midterms, followed by a rally into December. For now it all comes down to Trump and oil.
Rotation and Pairs This Week
I want to switch things up and walk through some of the trades and pairs we watch all the time, to give a better idea of how money rotated this week.
Chips had a strong outing, with SMH pushing 7.5% off the Monday lows, while the IGV side of the pair closed basically flat from Monday's highs. The pair continues to work. DRAM closed up 9.7% as chips pushed higher and memory bid, which allowed tech to pop. The pair with DRAM has been MAGS, as we know, and part of the reason markets struggled this summer is that memory and MAGS were going in opposite directions. This week, though, MAGS closed up about 1.3% after rejecting its all time high on Friday. So the tape was chips up, SaaS down, and MAGS up slightly with an ATH rejection.
Another pair is DXY, which closed above 100, up 1.5% on the week. The pair there is BTC, which closed up about 7%, while metals came down hard on the hike as usual. Those pairs stay important to watch as the indices closed out the quarterly opex.
The Week Ahead
This is a major week. We are in the post opex window with quarterly opex now behind us, FOMC is behind us, and now we run into the Xi meeting in Washington, which will be huge for chips and NVDA and for global relations broadly. If anyone can soothe Iran tensions, it is their big brother China. After all, we went after Venezuela and Iran to hit China, since those were its big oil partners and it let us hurt China by proxy. In my view, the wars in Iran and the attacks in Venezuela are really about China and slowing it down. So if this meeting goes well, it could help end the Iran issues, and it could help NVDA if news about reopening China follows.
ES Levels and Trade Plan
To start the week, I am looking to trade ES off the 7724 zone. If we can stay above it, I think a move into 7757 to 7794 is in play to start, with the 7790s being a tough cookie to crack. If 7724 is not held or reclaimed, we run the risk of seeing 7670 to 7649 below, with the LWL not far under that. We must defend the 7670 zone or the risk is the LWL. Pivot is 7724.
VIX and Expected Move
VIX closed under 15 on Friday, which means a smaller implied move. On SPX, Monday 0DTE and 1D options are pricing +/- 42 points, which is small and makes sense post opex. For reference, VIX at 14.82 implies roughly plus or minus 71 SPX points of theoretical daily volatility. The priced range works out to about 7,608.5 to 7,692.5.