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Our View
While I mainly follow the ES, I also follow the YM (Dow futures). I have posted about it before, but the YM never got beared up like the ES and NQ. If you look at a chart, you’ll notice it’s trading much better too.
The YM’s year-to-date advantage over the ES is the largest since 1933. At its low, the YM traded down to 28,635 and last week’s high, it hit 34.707. On April 21 the YM was at 35,400 and on the same day in April, the ES was at 4510. What I am saying is, the Dow is almost back to where it was in April and the ES is at 4100, almost 400 points lower than where it was in April. Usually, it's the ES that outperforms the Dow.
As of Friday's close, the Dow is down 5.3% for the year, which is pretty damn good compared to the ES which is down 15%, and the NQ which is still down a whopping 27% YTD. Between the NQ and ES, the Dow is the only one not in a bear market and many on Wall Street think the Dow will continue to outperform in 2023. Also, inflows into funds that track the Dow are seeing the highest net inflows in the first 10 months of the year since 2017.
Our Lean — Danny’s Take
If the ES is going higher it's going to need some sell-offs and some back-and-fill. And even if it does go higher, we have to be on the lookout for some negative headlines that the news algos can exploit.
I have always known it from the trading floor, but @realTraderDave has taught me to be patient with those types of drops before buying them. That said, we have a somewhat quiet week on the economic and earnings front.
There are some interesting, but no significant earnings reports until Thursday, when we hear from Costco, Lululemon and Broadcom. Today we’ll get an ISM at 10 a.m. ET and on Friday we’ll get a PPI number at 8:30.
Next week is when we get the CPI print and the Fed’s rate decision. As the month wears on, more and more people will be cutting back on their trading — it actually feels that way now.
Our Lean: