Hey Trader,
I got a good question in the Golden Setup room this week.
I trade the Nasdaq. Every level on my chart got built for the Nasdaq.
So a trader wanted to know why I spend half my morning staring at the S&P 500 instead.
Here’s my answer. The ES tells me whether my NQ setup has a chance before I ever click the button.
Wednesday showed you the version where the answer is no.
The NQ was behaving beautifully, and then it just sat there and chopped while everybody watching got frustrated with it.
Elizabeth Copeland came on with me and said it plain. The NQ wouldn’t pop, and she hated it.
The problem was never in the Nasdaq.
“NQ wants higher. ES is like, ‘No, I don’t think so.'”
I want to walk you through what I looked at on that ES chart. It takes about four seconds once you know where to put your eyes.
Thursday gave me the same read with the opposite answer, and the trade that came out of it ran 600 handles.
Get this right and you’ll quit handing good Nasdaq setups to a tape that was never going to pay them.
You’re Climbing. The ES Is Carrying the Gear.
I called the S&P 500 my Sherpa on Monday morning and the name stuck all week.
You’re the one doing the climbing. Your setups live on the Nasdaq, and that’s where you get paid.
The guy carrying the gear still sets the pace.
You don’t summit faster than he walks, no matter how strong you feel that morning.
The reason sits inside the contracts. The Nasdaq holds tech, and the S&P 500 holds tech plus everything else.
“This thing runs it all. It’s got tech in it. It’s got everything in it.”
Those same giant tech names are inside both indexes at once. When they move, they move both charts together.
So the NQ can lead. The NQ cannot leave.
“You’re not going to just completely like moon and rally on the NQ with the ES doing this right here. It’s just not going to happen.”
The Four-Second Check
The ES never gives me a trade.
I haven’t taken a single ES setup off that chart in my morning session all year. It gives me permission, or it takes it away.
I run the same level work there that I run on the NQ. Opening range marked, cash open drawn, key levels on before the bell.
Then I ask two questions.
Where is the ES relative to its opening range, and does it have a bid?
“What is ES doing? Does ES have a bid?”
A bid means buyers keep stepping in on every dip instead of letting it slide.
You see it as higher lows and candles that refuse to close at their lows.
Above cash with the opening range broken, I take my Nasdaq setup and ask for the full target.
“If ES is above cash, we want to go with.”
Stuck inside the range with no bid, I still take the setup.
I just size down, take the scalp, and quit pressing for the big number.
Same setup, same entry, two completely different expectations. The ES decides which one I’m in.
Wednesday Said No
The NQ looked terrific that morning. It respected its opening range and gave us clean breakouts off of it.
The Sherpa wasn’t moving.
The ES went sideways in its opening range and never broke out.
It dropped to the pre-market low and came right back in, which is a false breakdown and the classic break and retest.
Anybody who acted on that got stopped out.
I knew what it meant before the bell, because my ES levels were already drawn.
Price had come up from the 50, so nothing higher was in play without a close above the 62.
Closes back below the 50 pointed it at the 33 instead. That killed the long side of the S&P 500 chart.
It didn’t kill my Nasdaq setup. It capped what that setup could possibly deliver.
“This is what stifled the NQ’s breakout of its opening range, which I was part of. It just couldn’t make the next leg up because of this.”
I was in the trade. Nothing about the read was wrong, and the fuel simply wasn’t there.
Thursday Said Yes
Crude printed 100, the tape flushed hard, and the ES pushed through its prior week low.
That’s a big old dip buy if the bulls have anything left in them.
I took two shots at the NQ and lost both. A quick minus 20 on the 106, then stopped out on heat at the 88.
I went a third time at that 88. Then I sat on my hands and watched the S&P 500.
“ES is showing us the way now.”
That’s the moment I raised my ask.
I’d been looking for 150, and once the ES cleared its round level I started looking at 166 instead.
“Come on, NQ, one more push. ES is above the roundy, so maybe that’ll give us the push we need.”
The Nasdaq closed above the 33 and released.
It came out to roughly 600 handles, and I was long nine micros without realizing I’d clicked in that many times.
I didn’t upgrade that target because the Nasdaq looked strong. I upgraded it because the Sherpa started walking.
The One Time You Ignore All of This
Divergence between these two is rare enough that I treat it as a special case.
“The only time that I’ve really seen that and where it’s actionable is on when you have really big earnings out of a huge component in the NASDAQ.”
A monster print out of one of the top names overwhelms price action in the ES.
The Nasdaq takes off on its own and the S&P 500 gets dragged along behind it.
That’s earnings season. Every other week of the year, assume the ES is in charge.
Put It On Your Screen Before Monday
Pull up the ES on a second chart this weekend and mark it up exactly like you mark up the NQ.
Opening range, cash open, your levels.
Then go back through this past week.
Take every Nasdaq setup that fizzled on you and check where the ES was sitting at that exact moment.
Friday will make the argument better than I can.
I had a long working off the weekly pivot with the ES still bullish to go get its 88. It sat on its expected move high all morning and never cleared it.
“ES is still bullish to go get 88, but they can’t find anybody to come with them.”
Nobody came, and the NQ chopped inside its opening range for an hour.
I threw plenty at that tape and got very little back. I never built a pile of losses either, because the check kept my expectations small the whole way through.
We get the Fed next week, and a rate hike is the elephant in the room.
“I think if they truly hike, it sends more of a message than just the hike itself. It would be an aggressive move from the new Fed. I don’t think it’s priced in at all.”
The bears owned this tape all week and still couldn’t finish the job.
Every real move got taken overnight, then the session opened and turned into a knife fight over the same fifty handles.
Your Nasdaq setups will look perfect in that tape. Check the Sherpa before you trust a single one of them.
The level map, the opening range work, and the bracket math I run on both instruments every morning live inside my Golden Setup.
Trade smart,
Tony Rago
Creator of the Golden Setup
