Warsh, What Is He Good For? Funding My Bear Swings

Warsh, eh. What is he good for? Yesterday, apparently, funding my bear swings.

The Fed held rates for the fourth meeting running, which was never the story. The story was the new chair opening with a cheery “good day” and the talking heads promptly losing the plot, a bit like spotting Ewan McGregor in the wild and getting a “Hello there” followed by “these aren’t the rates you’re looking for.”

The market didn’t fancy any of it, the sell-off came, the bears growled, and my systems paid me anyway. The dot-plot autopsy can live over on the News and Macro Edge, I just find it funny that everyone was glued to the things that didn’t move the needle.

Last day of the week today, then Juneteenth shuts the doors, and the peace deal supposedly gets signed while no one can trade it. Cue a weekend of nail-biting into the Sunday futures open. Good times.

Market Snapshot

The overnight tape is a modest bounce after yesterday’s slide. The potential range boundaries on the indices are holding still, gold is reacting off the underside of a longer-term VWAP it’s trying to reclaim, oil keeps sliding, and bitcoin is holding fast. The VIX has filled its gap, even though not every index are mixed closes. In my experience gaps tend to get filled reasonably quickly, occasionally they stay open for months, but usually they get drawn shut like a magnet.

• ES (S&P 500): 7,549.50 / +0.51% / range boundaries holding, a bounce off the slide

• YM (Uncle Dow): 52,161 / +0.22% / holding the range

• NQ (NazQuack): 30,410.25 / +0.89% / leading the bounce

• RTY (Uncle Russell): 2,970.0 / +0.62% / clean consolidation

• GC (Gold): 4,280.5 / +0.10% / reacting off the underside of a longer-term VWAP it wants to reclaim

• CL (Crude): 74.03 / -1.31% / keeps sliding, the drop continues

• VIX: 17.18 / -6.78% / filled its gap

• BTC/USD: 64,275.77 / -0.26% / holding fast

SPX Analysis

SPX kept slipping and sliding lower, and the bear Tag ‘n Turn with the MACD-v warning was the right move. As it turned out, the 1-DTE overnight trades were more profitable than doing the normal 3-DTE swings. Price has now pushed to the lower Bollinger band, and we are day three outside the MACD-v bull extreme, so we are back to normal service. Staying on the MACD-v, we now have a bearish histogram extreme, and the data says to expect a little snap back from here.

Back to normal, the data says expect a snap back.

RUT Analysis

Uncle Russell looks a lot clearer and cleaner, a clean consolidation with breakout pullback setups. The 1-DTE bear swings paid out nicely here too, again more profitable than the usual 3-DTEs, so I’ll have to give some thought to double dipping and compounding. The MACD-v histogram extreme suggests a little kick back, which could be the pullback part of the breakout. A move through yesterday’s lows and we could see a run to the bear breakout target around 2880. The daily still looks like a clear turnaround, range highs to range lows, and probably not in a convenient straight line.

A little kick back, then the run to 2880.

Crude

Crude gave me an opportunity that didn’t arrive overnight. The pop higher to retest the descending VWAPs, with a clear hourly rejection, gave me my entry. Sell the rally in a downtrend. Pop and drop, and that drop has continued overnight.

Pop n drop, and the drop continues overnight.

Gold

Gold looks great. As I said earlier in the week, I had the right idea, just the wrong timing and strikes. Not this time. I chose a little extra time, and while I was initially wrong on direction, I was thinking we might take the inside bar on the dailies out first before potentially dropping. It did exactly that. I held my breath, and then the drop came, right to the rising VWAP like we thought. Cash out, and thank you.

I’ve also taken a speculative out-of-the-money debit spread for 7-DTE on the rally higher. The reasoning: look back at the last bottom on the 26th of April and you see a very similar fast drop followed by a fast push higher, with most of that move happening in the overnight sessions. So a low-risk initial entry to join the party made sense to me.

Right to the rising VWAP, cash out, thank you.

BTC

Bitcoin is holding the higher of the two VWAPs, which is exactly what I wanted, rather than having to sit through a deep pullback before a push higher. I’m not a million miles away from my original entry, so I’ll hold off adding too soon and add into a firmer, more established up-move.

Holding the higher VWAP, I’ll add to a firmer move.

Premium Poppers

These are the day’s Premium Poppers on SPX and Uncle Russell. I chose ATM spreads, more like a lazy popper, because I was not as confident given it was Warsh’s first outing and the market might have been a little jittery. Prior to his debut talk it would have been one win and one loss with a small loss on the books. Then he opened his mouth and said good day, and the rest is profitable history.

Here’s the funny thing. Most people will not trade the NFP or FOMC days, for no reason other than they don’t like it or feel nervous, something mindset-y. But the hard data over 21 years of looking at ORB setups says this is an odds-enhancement day. And wasn’t it just.

Most skip FOMC day, the data says that’s the edge.

Expert Insights

Mark Douglas, who spent his career on the psychology of trading, put it plainly in Trading in the Zone:

That is the whole story of an FOMC day. Most traders sit it out because it feels too uncertain, and the nerves do the deciding for them. But the uncertainty was never the problem, the flinch was.

The 21 years of ORB data don’t care how anyone feels about Warsh’s debut, they just say the day carries an edge. I took the setups, sized them for the jitters with ATM spreads, and let the process do its job. The market handed out the same opportunity it always does. The only variable was whether you showed up for it.

Fun Fact

Today is the last session of the week because tomorrow, Friday, is Juneteenth, and the US markets are shut.

It is a young holiday: Juneteenth only became a US federal holiday in 2021, when it was signed into law, making it the first new federal holiday since Martin Luther King Jr. Day back in 1983.

The date marks the 19th of June 1865, when Union troops finally reached Galveston, Texas to enforce the end of slavery, more than two years after the Emancipation Proclamation had technically freed them. The NYSE and Nasdaq both close for it, which is why today is your lot until the Sunday futures open.

[Source: Britannica and the US National Museum of African American History and Culture – britannica.com / nmaahc.si.edu]

Trade well,
T2 Markets

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