Can they get one more squeeze going?
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Our View
This whole thing is crazy. The ES rallies and sells off but really hasn’t gone anywhere. On Tuesday, the ES closed 12 points above Friday’s high
I told the MrTopStep forum that there is going to be a major event in the first half of the year and the S&P is going to take out the 3502 low. That doesn’t mean there won’t be short-covering rallies — there will be — but they will reverse at some point.
We always talk about the ES, but what about the DAX?
The German DAX made a low of 11,830 on on Oct. 3rd, had a really nice reset in mid-December and has been going straight up since, recently climbing toward 15,000. It’s up more than 3000 points in three months!
When the Ukrainian war began, the Dax was at 15,400. We are now within a few hundred points of that level and it makes you wonder, is the DAX pricing in the end of the war?
That is what the market is saying on the charts. For reference, the all-time highs in the DAX is 16,295.
Our Lean — Danny’s Take
There are no major economic releases or Fed speak today. It should be a quiet day in that regard, but that doesn’t mean the ES won’t be flipping around. Tomorrow we have the CPI data for December. It’s the all-important economic reading for the Fed.
Our Lean: The ES held right where it should have yesterday, ~3895. Sell the early rallies and buy the pullbacks. Initially, I want to see the low 3940s hold. That’s yesterday’s high. Further below and the 3920 to 3928 area needs to hold.
Over 3955 could bring us 3970 to 3975, then higher if the trend is favorable and breadth is strong.
MiM and Daily Recap
The ES re-opened at 6:00 pm Monday night at 3915 which was the early high and proceeded to sell off until 11:40 pm made a low of 3897.50 and from there it traded all the way back to 3915.75 at 3:30 am. It traded back down to new lows of 3891.50 at 7:50 am which was the Globex low and the low for the day.
When the market opened at 9:30 am, the first print was 3907.50 and in the first 10 minutes we traded up to 3927.25. At 10:15 we made a high of 3935 and within 30 minutes, traded back down to 3897.25 — whipsaw city. After making a low of 3897.25, which happened to be the low for the day session, we chopped our way all the way back up to new highs by 2:30 pm to 3937.50.
The print at 3:50 was 3933. and the ES made a new high for today at 4:00 at 3943.75, only to settle at 3940.75, up 27 points or 0.7%.
In the end, we had the early “sell the rallies” trade right, but didn’t expect the ensuing rip. In terms of the ES’s overall tone, it was the Nasdaq that dragged it lower and pushed it higher. In terms of the ES’s overall trade, volume was low at 1.47 million contracts traded.
Technical Edge
- NYSE Breadth: 77% Upside Volume
- Advance/Decline: 72% Advance
- VIX: ~$20.75
Don’t let anyone tell you that the action here has not been tricky. Monday started off with a huge upside burst and subsequent rotation, then a massive fade. We stated that we did not like buying upside rotations in this type of tape, but laid out a few trades for just such a thing.
We’re lucky that our prep work is paying off, but I can’t shake this sense of keeping my guard up — Maybe it’s with the binary nature of the CPI print tomorrow.
The bulls are again looking to gain control near the open. For those carrying open longs, consider it an opportunity to trim into strength and ahead of the CPI.
Because the CPI report has been such a big focus lately, it’s one reason we have been trimming down our individual stock trades so quickly: to reduce risk and put away profit before a potential “change in tune.”
S&P 500 — ES
As Danny said, the ES “held where it needed to,” bouncing off the 10-day and 21-day moving averages. From here, let’s see if it can hold up above the 3940 area.
If it breaks back down, 3920 to 3928 is a key area bulls need to hold as support. Below it puts 3900 in play.
On the upside, a move through 3956 puts this week’s high in play at 3973, then the 3985 to 4000 zone.
SPY
A solid close yesterday for the bulls as the SPY regained $390 and the SPX regained 3900.
From here, $390 remains the key line in the sand. If the bulls can hold it, they may make a run for this week’s high at $393.70. Above that opens the door to the $396.30 to $396.80 area.
A failure to hold above $390 technically keeps yesterday’s low in play near $386.25.
BRK.B
On Monday, we laid out rotation trades in BRK.B, FSLR, COP. Berkshire couldn’t hold the rotation, FSLR has been an absolute banger and COP has been muddling along. Honestly, that illustrates how trading goes in a nutshell.
In any regard, BRK is trying to reset. This one is a market-proxy (although it has held up better than the SPY). If it can go weekly-up/2x monthly-up, this is one to keep an eye on over $319-$320.
Again, half-sized position, but keep an eye on it. Stop would be yesterday’s low.
Open Positions —
A note: After talking to some members, I want to make the setups a bit more clear. We are a trade-ideas service, but want to make entries & exits simpler to understand. We will be sending more updates, a few educational pieces and looking for a way to make our setups more clear in how we are managing them.
- Numbered are the trades that are open.
- Bold are the trades with recent updates.
- Italics show means the trade is closed.
- TLT — Down to ⅓ after TLT’s strong push to $105 on Friday. Raising stops to $100 or $101 and (I personally) am just leaving a runner against the stop.
- Now you can handle this however you want. $106.31 is a gap fill, so is $108.16.
- DE — Trimming down to ¼ on any push over $440. B/E stop or consider $425 as a new stop. Congrats!
- /NG (can use UNG too) — Went for a ¼ trim at $3.90 but was “ideally looking for $4+.” Down to ⅓ or ½ here, your preference.
- Now certainly a B/E stop. $4.20 to $4.25 is the next trim spot
- COP — Long from $119, the 2x weekly-up. $124 to $127 could be a reasonable trim spot. (Keep in mind, the 50-day is at ~$122, so maybe ⅕ to ¼ trim there just for lunch money).
- $115 Stop. Maybe consider getting down to a ½ position if we get back to our basis. I don’t normally like to do that, but yesterday’s action was tricky.
- FSLR — ½ position, long at $157.75 — Second trim (⅓ at $165 to $167 as per plan). Trim more between $170 and $173, likely carrying just a ¼ position if we see new ATHs.
- $160 stop.
- TSLA — short from
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
Relative strength leaders →
- SBUX — nicely weekly-up setup after 10-week ema reset.
- DE —
- SMCI —
- TJX, ULTA — looking for pullback here to active support (10-day) given the bearish update from LULU.
- CAT
- MRK
- CAH
- BRK.B
- LNG
- LMT, RTX, NOC — RTX best of the bunch
- MET — weekly
- GIS
- HON — weekly
- FSLR — $140 is the 21-week sma and retest of prior resistance
- XLE — XOM, CVX, COP, BP, EOG, PXD — (Weekly Charts)
Economic Calendar — The Week Ahead
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