by Contributor

Buying the Dips

An interesting year-end strategy

Hello Fellow Trader,

Don’t Forget! Our upcoming dynamic Live Q&A session featuring two leading experts in the field is this weekend!

Please register for S&P 500 Quantitative End of Year Review + Stock Market Outlook for 2024 on Dec 23, 2023 11:00 AM EST at:

Reserve Your Spot Now!

After registering, you will receive a confirmation email containing information about joining the webinar.

We look forward to having you join us for an engaging and informative session!

Our View

This post is from a friend of mine, former floor trader Peter Yastro. I posted it on Twitter, but felt it would also make a good post in the OP. Peter is a long stock guy so this rally has been good for him. Here are a few lines about the days ahead:

Peter Yastrow

Expect pretty small ranges until the very end of the year.
Look for a big whipsaw move at December end/Jan start as hedge funds all set up the “wash trade.”
- They put on a big long, and the next day completely hedge it with a big short in a highly correlated product. (Like long stocks, short futures).
After 364 days they have a short-term loss, and after 365 days they’ll have a long-term gain.
- They use the loss to offset the gains for the year and benefit since tax rates are different for short term and long-term gains.

Our Lean

The ES has now rallied almost 700 points from its 4122 low and has been up 9 sessions in a row — well, basically. It “fell” 6 points the other day, but has rallied over 260 points in this stretch. It’s hard to call that dip a win for the bears!

Clearly, “thin to win” is working nicely with all the cash going into stocks at year-end. What other choice do underperforming asset managers have?

Our Lean: As long as the volumes are this low and there are big cash buyers, the ES is going to keep going up. Buy the pull backs.

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

Upside: Trade and hourly close above 4809.50 targets 4816, then settlement at 4817.25, then 4822.50. Trade and hourly close above there targets 1 weekly sd at 4826.53, hourly close above there targets 4835.96, then 4841.24, then 1 sd at 4843.55. Hourly close above there targets 4852.71 hourly close above there targets 2 sd at 4869.85. Hourly close above there targets 2 sd weekly at 4881.82.
Downside: Trade and hourly close below 4809.50 targets 4807.88, then 4803 and 4802.46. Trade and hourly close below there targets 4798.25, then 4793.50, hourly close below there targets -1 sd at 4790.95, then 4787.50. Hourly close below there targets 4780, then 4775.75. Hourly close below there targets 4766.68, then -2 sd at 4764.65, then 4755.51.

MiM and Daily Recap

The ES traded up to 4803.75 on Globex and traded 4797.50 on the 9:30 regular session futures open. After the open, the ES traded 4796.50 and went on to make 6 new highs up to 4817.00 at 11:40, taking out the old contract high at 4817.00 at 11:50 and then pulled back to the 4808.25 level at 1:12.

For the next two hours, the ES back-and-filled in a 5 to 8 point range, traded up to 4817.50 at 3:45, pulled back to 4812.50 and traded 4813.50 as the 3:50 NYSE cash imbalance showed $1.98 billion to buy. The ES traded up to a new high at 4821.50 at 3:56 and traded 4820.25 on the 4:00 cash close. After 4:00, the ES traded down to 4815.75 and settled at 4818.25 on the 5:00 futures close, up 28 points or +0.53% on the day

In the end… the bull has gone wild. In terms of the ES’s overall tone, it was firm all day. In terms of the ES’s overall trade, volume was low: 155k traded on Globex and 907k traded on the day session for a total of 1.026 million contracts traded.

Technical Edge

NYSE Breadth: 85% Upside Volume
Nasdaq Breadth: 68% Upside Volume
Advance/Decline: 81% Advance
VIX: ~12.50

ES

Levels from HandelStats.com

ES daily

Upside: Trade and hourly close above 4809.50 targets 4816, then settlement at 4817.25, then 4822.50. Trade and hourly close above there targets 1 weekly sd at 4826.53, hourly close above there targets 4835.96, then 4841.24, then 1 sd at 4843.55. Hourly close above there targets 4852.71 hourly close above there targets 2 sd at 4869.85. Hourly close above there targets 2 sd weekly at 4881.82.
Downside: Trade and hourly close below 4809.50 targets 4807.88, then 4803 and 4802.46. Trade and hourly close below there targets 4798.25, then 4793.50, hourly close below there targets -1 sd at 4790.95, then 4787.50. Hourly close below there targets 4780, then 4775.75. Hourly close below there targets 4766.68, then -2 sd at 4764.65, then 4755.51.

NQ

NQ Daily

Upside: Trade and hourly close above 16971.50 targets 16984.62 then 17006.38, trade and hourly close above there targets settlement 17020.50. Hourly close above there targets 17040.75. Trade and hourly close above there targets 1sd weekly 17136, trade and hourly close above there targets 1sd 17166.78, trade and hourly close above there targets 17269.75 then 17304.75 then 2sd 17313.07. Trade and hourly close above there targets 2sd weekly 17450 then 3 sd 17459.35.
Downside: Trade and hourly close below 16971.50 targets 16949.88 then 16928.25. Trade and hourly close below there targets 16890.38 then 16884.75 then -1sd 16874.22. Hourly close below there targets 16796.75 then 16777.75 trade and hourly close below there targets 16740.50 then -2sd 16727.93. Hourly close below there 16882 then 16608.35******, then -3 sd 16581.65

Guest Post

PTG/ Taylor 3 Day Cycle

Author: David D Dube’ (a.k.a. PTGDavid)

Website: https://polaristradinggroup.com/

Prior Session was Cycle Day 2 (CD2): Normal CD2 as price consolidated in DTS’s upper target zone between 4815 – 4825 as outlined in prior DTS 12.19.23. Prior range was 33 handles on 1.062M contracts exchanged.

…Transition from Cycle Day 2 to Cycle Day 3

This leads us into Cycle Day 3 (CD3): There still remains additional upside potential to achieve 3 Day Cycle Target (4848), although the next pullback/decline can begin at any time since cycle statistic has been satisfied. As such, scenarios to consider for today’s trading.

Bull Scenario: Price sustains a bid above 4815, initially targets 4825 – 4830 zone.

Bear Scenario: Price sustains an offer below 4815, initially targets 4805 – 4800 zone.

PVA High Edge = 4819 PVA Low Edge = 4806 Prior POC = 4815

*****The 3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.

For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:

Link to access full Cycle Spreadsheet > > Cycle Day 3 (CD3)