ES Goes From Extremely Oversold to Overbought

Year-end targets are on the move

Our View

Riding a four-week winning streak and with the ES rallying over 400 points from the late-October low, we’ve seen the market go from extremely oversold to overbought in a short period of time. 

Now the question is, has the ES gone up too fast? I think it has, but I also think that’s a normal feeling for the size of the rally. 

Chew on this: The VIX traded up to 23.08 on October 23rd and about a month later on Friday November 24th, it closed at the session low, at 12.45. 

More and more Wall Street banks are pushing their S&P projections higher and higher. Last week Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets joined Bank of America’s Savita Subramanian in adopting 5,000 as her year-end target for 2024. 

UBS is expecting the S&P 500 to hit 4,700 by 2024, a base case scenario of 3% upside, while 12% upside in their most bullish outlook. Bonds are UBS’s top asset class for 2024. In particular, they’re eyeing quality bonds, especially government and investment-grade ones. 

Goldman Sachs research forecasts the S&P 500 index will end 2024 at 4,700, representing a 12-month price gain of 5% and a total return of 6% — including dividends. Lastly, Abby Yoder, US Equity Strategist at JPMorgan Private Bank, expects a 2024 mid-year SPX target of 4,700, adding: The MAG7 has driven the market this year—that means both up and down. I want to get through 2023 before I start talking ES 5,000 but I do think there is going to be another leg up going into the end of the year. I just don’t think we are looking at another 4 or 5-week rally.

MiM and Daily Recap

The ES traded up to 4568.50 on Globex early Wednesday morning and traded 4566.25 on the regular session open. After the open, the ES shot up to 4580.50 at 9:44 and then traded down to 4555.00 at 10:18, rallied up to the 4571.50 level at 10:42 and sold off down to 4559.00 at 11:54. From there, it slowly traded back up to 4575.50 at 12:13. After the high, the ES pulled back to the 4562.25 level, made a 4572.50 double top at 2:14 and then dropped 14 points down to 4555.25 at 2:40. As you can see, buyers were showing up in the 4550s and sellers were stepping up in the 4570s. 

The ES rallied above the VWAP at 4570.00 at 3:43 as the early imbalance showed $80 million to buy and traded 4568.25 as the 3:50 cash imbalance showed $166 million to buy, traded 4566.75 on the 4:00 cash close and settled at 4565.75 on the 5:00 futures close, up 17.75 points 0.39% on the day. 

In the end, it was a low-volume back-and-fill. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was low: 240k traded on Globex and 1.133 million traded on the day session for a total of 1.353 million contracts traded.

Things were fairly mute over the holiday Globex session (Thursday night to Friday’s early close). The ES opened at 4564.00, made a low at 4562.00 and a 4572.00 high, with 536k total contracts traded. 

Technical Edge

Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!