SP500 LDN TRADING UPDATE 19/8/25
WEEKLY & DAILY LEVELS
***QUOTING ES1! CASH US500 EQUIVALENT LEVELS SUBTRACT ~15 POINTS***
WEEKLY BULL BEAR ZONE 6410/00
WEEKLY RANGE RES 6560 SUP 6380
DAILY BULL BEAR ZONE 6410/00
DAILY RANGE RES 6526 SUP 6408
2 SIGMA RES 6587 SUP 6347
GAP LEVELS 6490/6367/6264/6147/6077/6018/5843/5741/5710
VIX DAILY BULL BEAR ZONE 16.50
DAILY MARKET CONDITION - ONE TIME FRAMING DOWN 6475
One-Time Framing Down (OTFD): This describes a market trend where each successive bar forms a lower high, indicating a pronounced and steady downward movement.
TRADES & TARGETS
SHORT ON TEST REJECT WEEKLY RANGE RES TARGET DAILY BULL BEAR ZONE
LONG ON TEST/REJECT DAILY BULL BEAR ZONE TARGET DAILY RANGE RES
(I FADE TESTS OF 2 SIGMA LEVELS ESPECIALLY INTO THE FINAL HOUR OF THE NY CASH SESSION AS 90% OF THE TIME WHEN TESTED THE MARKET WILL CLOSE AT OR BELOW THESE LEVELS)
GOLDMAN SACHS TRADING DESK VIEWS
FICC and Equities
18 August 2025 |
As we settle into the depths of summer, I’m adopting a strategy that focuses on more frequent, concise updates. Consequently, I’ll share four key points. These points are not meant to convey a definitive directional perspective—rather, they are simply observations I noted during my weekend reading. One point worth emphasizing is my persistent preference for large-cap stocks over small-cap ones. The data in paragraph #3 provides solid justification for maintaining faith in this trend's fundamental aspects. However, it’s important to acknowledge that this viewpoint is likely widely held, especially as the market is currently testing popular short positions. My main takeaway: as we approach a two-week phase characterized by reduced liquidity and turnover, the risk associated with consensus positions increases. Practically, this leads me to consider short-dated options to navigate the upcoming events around Jackson Hole (with Chair Powell speaking on Friday) and Nvidia’s Q2 earnings on the 27th.
1. NDX and the History Book
Consider this sequence of recent NDX returns: May +9.0%, June +6.3%, July +2.4%, August +2.1%. In several ways, this pattern evokes memories of the dynamic summers at the tail end of the 1990s. Reflecting on 1998, we saw U.S. retail investors captivated by the promise of groundbreaking technology, with stocks near record highs. Amidst this optimism, macroeconomic turbulence led to a series of rate cuts beginning in September. Fast forward to today: while not unprecedented, the current market environment feels extraordinary. With NDX at all-time highs, the VIX at cycle lows, and the Fed poised to initiate an easing campaign likely starting in September, the parallels are striking. Having experienced significant market cycles over the past 26 years, we should at least appreciate how favorable conditions have been recently.
2. The U.S. Consumer
Following last week's decent retail sales report, this week brings a crucial moment for consumer insights as prominent companies (WMT, HD, LOW, TGT) report Q2 earnings. As Scott Feiler observed, earnings season has generally revealed a “slightly shakier” outlook for the U.S. consumer, with weaker price action in sectors like restaurants and travel. While there’s always something to glean from the diverse range of consumer earnings, the underlying trends seem clear: (1) high-end spending outpaces low-end, (2) discretionary items outperform staples, and (3) services outperform goods. Additionally, Scott highlighted the housing trade as a standout in consumer markets—this segment continues to perform well even on less-than-perfect results.
3. Small Cap vs. Large Cap, Short-Term vs. Long-Term
Last Monday, markets opened with a record short position in RTY futures, and by week's end, the index rallied over 3%, driven by short-covering momentum. This was part of a broader reversal, with consensus shorts like healthcare experiencing sharp rebounds. Despite acknowledging technical factors and the size factor’s historical stretch, I remain structurally bearish on small caps relative to large caps. Weekend reading from U.S. Portfolio Strategy on Q2 earnings highlighted that real sales growth (constant-currency basis) declined for mid- and small-cap companies. Moreover, comparative margin data further underscores the challenges faced by smaller firms in the current environment.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!