Our View
Low Volume Grind High Leave’s The S&P & Nasdaq On New Closing Highs
The S&P futures continued its year-end march higher yesterday as volume dropped on both Globex and the day session. The ES traded 4696.75, traded 4696, and then rallied to handles up to 4716.25 at 9:39. After the pop the ES ‘back and filled’ in a 5 to 6 handle range and then rallied up to 4717.75. After another small ‘back and filled’ the ES traded up to 4718.50 and then up to 4721.75 just before 11:03 and up to 64724.25 at 11:21. After every new high there was a 4 to 7 handle pullback. At 12;05 total volume was only 427,000 contracts. For 2 hours the ES chopped up and down in a 5-7 point range and around 2:11 some small buy imbalances pushed the ES up to a new high at 4625.50. The ES did another shallow pullback and then traded up to 4627.75 as the MIM showed $200 million to buy at 3:15 and sold off down to 4720 at 3:36. On the 3:50 cash imbalance, the ES traded 47xx as the final MIM showed $1.9 billion to buy then sold off down to 4714.00? On the 4:00 cash close. After 4:00 the ES traded in a 4 handle range and settled at 4716.75 on the 5:00 futures close, up 30.75 handles or up 0.65% on the day.
In the end, the ES thrives off low volume short-covering rallies. In terms of the ES’s overall tone, it was firm all day, even with the late downtick. In terms of the ES’s overall trade, volume was modest at 925,000 contracts traded.
The Week Ahead
Our View
When the shorts had their way it was all fun and games but the shorter they got the more buy stops they put in. As you all I coined the term ‘no stops go untouched in the S&P futures’ and that has been the case the last few days. The other part of this is all the big rotations at year-end. On Thursday it was buy the ES and NQ and sell the YM. Today is maybe the opposite.
So where are we? We are now entering Jeff Hirsch’s ‘Santa Claus Rally’ – Monday the 27th through Thursday, December 30th. I reentered my long position late Thursday when the ES pulled back to 4661.75 and I am going to try and hold it all week. I want to point out something; if you have big profits do not be afraid to take half off. There is no reason to let the ES rally so much and sit there and watch it reverse.
As we all know, there’s no crystal ball when it comes to trading stocks, options, or futures. But the Market Imbalance Meter may be as close as it comes. Knowing how the “Big Money” is placing its bets can give our trading room a big wave to ride — or a warning sign to stay out of the water. Come check it out now, risk-free for 30 days.
Economic Outlook
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