EB Daily Market Report - Special Report - Tuesday, July 12, 2022

First, we'll be having our July Max Pain event later this afternoon at 4:30pm ET. Room instructions will be sent out in a bit. I hope you can join me!

I've spent a lot of time the past couple days analyzing intraday price action on the QQQ over the past two months. I've analyzed opening price, price low at 10am ET, price low at 11am ET, price low at 2pm ET, and closing price. I know from prior studies that the first 60-90 minutes is "amateur hour" as trading in the first part of the day is typically very emotional. I always pay MUCH more attention to how we close in the final couple hours. To me, that data is much more meaningful.

The QQQ closed at 340.55 on April 20th, just before its rapid descent into the May 20th close of 279.67. From there, the QQQ closed at 309.28 on June 7th, before once again spiraling lower to close at 270.87 on June 16th. Then we saw the recent rally and we closed yesterday at 289.04. I thought it would be an interesting exercise to break down the QQQ performance by (1) opening gap, (2) open to 10am, (3) 10am to 11am, (4) 11am to 2pm, and (5) from 2pm to the closing bell. I expected that, given my belief that Wall Street is accumulating, we'd see the most bullish action in the final two hours of the trading. But, honestly, I never expected the results derived. Check out this table:

Down the left side, from top to bottom, are the bullish and bearish periods since May 20th. The 4/21-5/20 and 6/8-6/17 periods were the very bearish periods where the QQQ saw considerable weakness. The 5/23-6/7 and 6/21-7/11 were the two very bullish periods where the QQQ rebounded strongly.

As you move from left to right across this table, I've highlighted whether the QQQ, in aggregate, moved higher or lower during the time period reflected. I believe the conclusion here is extremely obvious. Wall Street is allowing emotional traders to panic out of stocks in the morning, driven mostly be large GAPS lower at the opening bell. That early weakness spills over to the first 60-90 minutes of trading, then the professionals step in and buy throughout the balance of the day to drive prices back up, especially in the final two hours of the trading day.

Knowing this information can help provide us confidence in buying our favorite ETFs or stocks AFTER any morning carnage. Keep in mind that there have been days over the past couple months where morning weakness continues throughout the afternoon as well. But the odds are that morning weakness will be followed up by strength.

Perhaps the most unbelievable stat is in the totals line. On April 2oth, the QQQ closed at 340.55 and yesterday the QQQ closed at 289.04, a drop of more than 51 bucks, or roughly 15%. In the final two hours of trading, however, the QQQ - during that exact same period - gained nearly 42 bucks.

Is that unbelievable or what?

Wall Street is trying to steal everyone's shares once again, but they won't get mine.

Happy trading!

Tom