Big Buy-Side Imbalance Fuels Late-Day Surge

Welcome to Dec. 1st

Follow @MrTopStep on Twitter and please share if you find our work valuable.

Our View

I am not sure how often this happens, but it’s the first trading day of December and it’s FRYday. 

I asked @HandelStats what the first trading day of December looked like (regardless of the day) and he said it was up 6, down 9 of the last 15 years. 

When I asked him to run the stats when the first trading day is a Friday (2017), there has been only one occurrence and it was an up day — the futures closed up 3.25 points, but had a 45 trading range, the largest of the month.  

FWIW, I also found this quick-read Goldman Sachs’ note interesting: Why the US dollar could stay strong through 2024.

Our Lean

There is a load of Fed speak and economic reports today (look at the econ table at the bottom of this note), but I think it comes down to two things:

Our Lean: My gut says we go higher. The current pattern is to sell the early rallies and buy the pullbacks. 

For those of you who like HandelStats levels, here they are: 

MiM and Daily Recap 

The ES traded up to 4578.25 at 8:37 and opened Tuesday’s regular session at 4566.25. After the open, the ES traded up to 4568.50, sold off down to 9:48, rallied back up to 4567.25 at 10:20, popped up one last time to 4563.25 at 11:04 and then dropped back down to a new low at 4544.75 at 1:32. Weakness stemmed from the tech sector, with TSLA, META, NVDA, GOOGL and AMD leading the markets lower.

After the low, the ES started doing a slow, upside back-and-fill. It was very easy to see the buy imbalances showing up in the ES and the NQ. At 3:01 the ES traded up to 4563.25, then dropped down to 4550.00 at 3:27, shot up to 4565.75 at 3:46 as the early imbalance showed $341 million to sell. The ES traded 4562 as 3:50 cash imbalance showed $6.2 billion to buy and then traded 4579.50 on the 4:00 cash close. After 4:00, the ES down-ticked and settled at 4571.75 on the 5:00 cash close, up 8.75 points or 0.19% on the day.

I want to show you a few late posts I made in the MTS room, while the imbalance meter looked like this on the MIM reveal:

Remember, I’m a firm believer in my rule that there are three parts to the trading day: What happens on Globex, what happens after the 9:30 ET futures open and what happens in the last hour. 

I am showing when I started buying the ES as the early imbalance was for sale, but I thought it would be big to buy and it was. I believe this is a great example of my 3 parts to the day.  

In the end, there was a mammoth rotation: Buy the Dow futures (YM), sell tech. In terms of the ES’s overall tone, I have to say mixed. The ES closed up almost 9 points, the NQ closed down 38 points (or -0.24%) while the YM closed up a whopping 501 points (or +1.14%) on the day. Golmam was right, they said there would be billions to buy and there was. 

Guest Post

SpotGamma is one the the shining stars of the options markets. If you have never heard of them or already know of them and have never signed up for their options flow products or the SG Academy, I fully suggest you check them out and add them to your trader’s toolbox.

Here’s a snippet from them:

Regarding gamma structure, the SPX Put Wall moved up to 4530 today (up from resting at 4400). The general nature of this rotation is deserved on the basis of evaporating put gamma at 4400, but the current precision of it is on the noise level—simply due to a lack of call gamma at 4530 interfering with the calculation. 4500 is a much more suitable Put Wall, as 4500 has already established itself as the bottom of the primary range from there to 4600, as governed by those central strikes with the most gamma.

Technical Edge 

ES 

Levels from HandelStats.com

NQ 

Economic Calendar

Note: Powell @ 2:00 p.m. ET

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!