June 7th, 2024

The labor market remains strong while bonds and stocks show weakness. Momentum, a crucial aspect in current trading, has been lost by the bulls today. With rates spiking and the Russell 2000 declining, the market is likely to stay weak. In the short term, bears may have a high to trade off in the ES and NQ. This doesn’t imply that the bullish narrative is over, but for today, I perceive this market as a ‘sell the rally’ scenario, not a ‘buy the dip’ one.

The key player at the moment is the Russell 2000, edging down towards the May lows. We’re witnessing a squeeze of longs in that market, anticipating no imminent rate cuts. I suspect this selling could start affecting the ES and NQ. In my view, the strongest bull markets occur when all major indexes operate similarly on a technical basis. Markets with divergence go through ebb and flow, resulting in bumpiness. This tape has divergence, which is likely to persist in the foreseeable future.

Despite seeing today as a ‘sell the rally’ tape, one must exercise caution while selling rallies as a day trader. This is still a bull market, and bulls don’t retreat without a struggle. It’s about being small, waiting for confirmation at resistance, and avoiding greed with shorts. I’m not inclined to be aggressive or sell into breaks in this situation. Patience is key.

Wishing you all an excellent weekend!

Cheers, DELI

Links to Charts

ES https://gocharting.com/sh/86db8442-2b2e-436c-b8d6-ba601e93c848
NQ https://gocharting.com/sh/f27ca306-b0de-48ff-9d42-8cfb6103b407
RTY https://gocharting.com/sh/def36651-9b24-4945-9999-d8c3ff5cefcc
ZN https://gocharting.com/sh/4c2ff416-bb6a-489b-b2ec-e634b6e9e6b2