Thursday's E-Mini S&P 500 futures (Es) auction turned out to be a pretty benign event, with traders quickly fading the bullish gap around 2447.50, but failing to trigger meaningful bearish extension beneath Wednesday's intraday lows. Value did migrate 4.5 handles lower on a closing basis, but as discussed in Thursday's note, we're still trading above Tuesday's bullish gap.
Barring a surprise headline out of the Jackson Hole Economic Policy Symposium, I'd expect relatively contained trading on Friday, with likely extremes near 2448.50 to 2454 on the high end, and 2428.25 on the low end.
Several readers asked for an opinion on the iShares Russell 2000 Index ETF (IWM) , so let's take a peek at the daily chart.
Now that the IWM has held the $133 to $134 area we've discussed several times over the past couple of weeks, several readers asked whether we should be selling short into the backtest of the 200-day moving average (MA) and bottom side of the multimonth uptrend line. My immediate thought would be to reduce the size of a long position, especially if we see the slightest sign of rejection from the declining 20-day MA. As far as selling short, I'd pass for now. I can't get on board with selling the IWM short (beyond day timeframe scalping) until I see the $133 to $134 area broken on a closing basis.
My favorite headline from Thursday's session was related to Amazon's (AMZN) plan to lower the price of a host of "best-selling grocery staples" across its newly acquired Whole Foods (WFM) stores. When I saw the word "staples," I, like many of you I suspect, thought they were talking about paper products and dishwasher detergent. But no. They're actually referring to items such as baby lettuce, Gala apples, organic salmon and almond butter.
I love salmon, so I'd love to see them price it at a more reasonable level. Then again, the fish I find at my neighborhood Kroger (KR) is good as well. It's wild caught, and quite a bit more affordable to boot.
And then there's Whole Foods' almond butter. I actually bought some last week, and it's quite nice. But the Kirkland Brand from Costco (COST) I normally buy is wonderful as well and, like the fish from Kroger, it's always been offered at a better price point.
The bottom line is I don't believe the American shopper who doesn't already spend the bulk of their time, and money, at Whole Foods is going to immediately abandon Costco, Kroger or Walmart (WMT) because Amazon opts to lower the prices on a handful of items. Items, quite frankly, that are not necessities.
Now, while the charts of COST and KR looked crummy even before Thursday's session, I suspect the 5% decline in shares of Costco, the 8% drubbing in shares of KR, and even the 2% slide in WMT were overreactions. As far as trading these names, I'd be interested in looking at COST on the long side on any continued overreaction into the mid- to low $140s. KR, unfortunately, can only really be traded on a very short-term basis against its mid-June swing low around $20.50. Walmart is in a bull trend, but I don't see an attractive entry point.
And for those wondering about Amazon, the support around $950 we discussed earlier in the week is intact, though dip buyers certainly seem bored with the name. A better area for swing traders to consider buying the stock would be down around the 200-day MA, so for now I'd avoid the name unless you're willing to sell it the moment it closes under $950.
Moving on to Friday's Es auction, we'll treat 2441.50 as our opening pivot, but we won't look for a directional push until price is holding above 2448.50 or beneath 2437.
An open beneath 2441.50 would be expected to immediately test 2437. If that level breaks, day timeframe sellers would likely begin auctioning prices toward 2428.25, thereby filling the bullish gap from Tuesday's regular-session open.
An open above 2441.50 that holds the opening print would have a clear path to 2448.50. Our first thought would be to look for supply entering the auction around that upper 2440s level. But if a break above is sustained, the bulls will have another shot at testing 2454 and Tuesday's intraday high.
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