Market Review
Last Tuesday I wrote, “the ESH21 is back within striking distance of its 3724 all-time high.” It took the entire week, but the ESH21 finally reached and probed the 3724 high to set a new 3732.25 high on Monday. We are now in the last week of the year where many of us have shut down our trading operations for 2020. This generally means lower volumes, some price whippiness, and lower daily ranges. Historically, the week is bullish until the last trading day of the year when many sell their losing positions for tax saving purposes.
A $900B coronavirus relief bill has been signed, a $1.4T federal spending bill keeps the US government going through September, the Federal Reserve remains accommodating, and AstraZeneca may soon have the third approved coronavirus vaccine which also handles the new Covid-19 strain hitting the UK. In the US, coronavirus cases, while near all-time highs, are down over 14% as the Thanksgiving spike played itself out. It is possible we will have a Christmas and New Years related spike as I personally know several people who have contracted Covid-19 through their family Christmas gatherings.
For now, the US government remains focused on supporting the economy which sets up a quarter or two of bullish stock markets for 2021. The markets are fine with Joe Biden as president. Contrary to conservative media, stock markets have performed better under Democrat presidents, most notably Clinton and Obama. However, according to Forbes, stock market and economic performance have little to do with presidents and government policies and more to do with economic cycles and interruptions to those cycles like 911, the savings and loan crisis, the mortgage crisis, wars, etc. The coronavirus fueled economic downturn could be classified as a depression in 2021 if the number of unemployed continues to grow. At the end of 2020, there is a lot of upside potential for the US economy to recover to pre-Covid-19 levels.
Resistance Areas (above):
Use current all-time high area for retest resistance
Support Areas (below):
3676-3678s
3651-3663s
3596-3620s
3568-3585s
3535-3538s
3499-3510s
Economic Calendar
Closing Prices
In the Tradechat Room
MiM
A small sell imbalance contributed to the only selling during the day as the market turned down around 15:20 and set up a 10 point chop range into the close.
Questions? Please email me: Marlin@mrtopstep.com
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Covid Corner:
Whether things are settling a bit or if there is going to be a Christmas surge we don’t really know since we took another data vacation and now we wait for it to catch up. Since yesterday, the falling count has moved from 43 to 40. We should see more salmon-colored states next week.
Wear your masks!
Stay at least 10 feet behind someone wearing a mask! (Particularly in a checkout line)
Stay home!
Take your Vitamin D!
Chart of The Day
GMTT – chart of the day – Soybeans – Dec 29, 2020
Soybeans (MAR)
Soybeans made an impressive move from its August low at 867 to a high yesterday at 1280.
In percentage a 48% up-move from its low.
We caught most of this up-move, with a combined profit of around 40%.
At GMTT we focus on finding the early entry / exit levels.
Sometimes the signal is given too early – but with keeping a tight stop, the risk/reward ratio is in balance.
The Soybeans and the Corn prices seem to be moving in tandem, and both are near a projected high.
We suggest taking profit on long positions.
A close below Soybeans (MAR) 1236 and Corn (MAR) below 442 elect a sell signal.
On a different note, Bitcoin reached our upside target of 26000.
Here we caught the low at 10750 in September but missed the last sprint.
We do not trust the current up-move and expect a sudden pullback.
The buy signal gets cancelled below 25700.
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Global Indices, VIX, a selection of stocks, Treasury Bond, Commodities, Soft Commodities, Currencies, and Bitcoin
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GLOBEX
| (ESH20:CME) GLOBEX Session | (ESH20:CME) Day Session |
| High 3726.50 | Opening Print: 3722.75 |
| Low: 3676 | High 3732.25 |
| Volume: 150,000 | Low: 3716.00 |
| ES Settlement 3729.50 | |
| Total Volume 720,000 |
S&P 500 Futures Recap – Trade Date December 28, 2020
S&P 500 Futures: New All-Time High Close
After trading in a 50.50 handle overnight range, the S&P 500 futures opened Monday’s cash session at 3722.75, up 27.75 handles, sold down to a low of day of 3716.00 in the first half hour, and then rallied to a morning high of 3729.75 in the first hour. The rest of the morning traded in a tight sideways pattern until buyers showed back up in the mid-afternoon pushing the S&Ps up to the high of day at 3732.25 just before entering the final hour.
Late in the day, the ES did pull back to 3724.75 before settling at 3729.50, up 34.50 handles or +0.93%. In terms of volume, it was an extremely light day with only 700K minis traded, in terms of price action, it was all about buying the low just before 9:00 and holding until 2:00.
Our View
T+2 And The End Of The Year Rebalance
It was a good year for stock market returns and a bad year for Covid19. As we go into the final 2 1/2 trading days of 2020, I think it’s a great time to reflect on both our losses and our accomplishments in our personal struggle balancing the virus and our day to day lives. The virus has shaken the United States with over 20 million jobs lost and 335,000 deaths. As we head into the end of the year I think its time to start thinking of better times to come. I know this may be very hard for some people but all I can say is ‘look around’, it could be worse. There is no doubt about it that stress and depression levels have skyrocketed. I have to admit it, I too get a little bummed and wonder where we went wrong but I am not looking back. Every day I ‘try’ to do something. Working, riding your bike, jogging, swimming, whatever you can do to fix your day up. Personally, I no longer trade all day. I trade for the first and last hour and in between, I’ll do anything to keep myself busy. I no longer complain about going with my wife to run errands, I am constantly cleaning up, whether it’s sweeping the floor or cleaning up the yard. Do you need your car washed? I am your guy, I have become a pro and I will even clean the trunk. I also try to give back when I can. In the end, we all need to stick together. We all need to do whatever we can to ‘beat covid’ and get our cities and industries going again. That time will come my friends, gradually things will get better and we all need to keep that in mind.
Despite Covid19 and its endless economic depression, the stock market is flying. Yesterday AMZN closed up $77 but was up $130 earlier. We live in a new world investing order and navigating all the twists and turns can be a difficult task.
S&P 500
Nasdaq Composite
Dow Jones
Russell 200
Our view, it’s really thin, only 587k ES traded on the day session. What does this mean? The first thing it means is no one is trading, just the trading junkies and the second part is ‘any stupid headline’ can rock the boat. So my view is to cut back, trade less, and if you are trading, ‘pick your spots better’. Our lean is the same as yesterday; sell the gap up open or the first rally above (yesterday it took 15 minutes for the NQ to reverse) and look for an early morning low to get long. My guess is if the ES and NQ do trade higher today we could see 3750-3760 before the week is over. On the downside, I think any 20 to 30 handle pullback would present a good buying op. Remember, T + 2 starts today and the end of the year rebalance falls on Thursday’s half-day session so I think it’s a good idea to be on the lookout for some selling.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
As always, please use protective buy and sell stops when trading futures and options.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Decisions to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
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