by Danny Riley

This post goes out as an email to our subscribers every day and is posted for free here around 2 PM ET. To get your real-time copy, sign up for the free or premium version here: Opening Print Subscribe.

Can they hold? OPEX should add some volatility early today.

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

Our View

The dominant factor in the index markets has been and still is the ongoing liquidation in the Nasdaq. Like I said, when you see constant selling in the NYSE and Nasdaq 3:50 closing imbalance and the 4:00 cash close it eventually plays catch up. Powell’s comments about the bank taking its time in deciding how quickly to lower interest rates only added to the tech weakness.

A couple of times last week and this week I mentioned that the ES acted tired and was over extended, yet I continue to say ”buy the pull backs”. Despite the NQ push to a record higher high there has been something going on under the surface, the non-stop selling in the Nasdaq. Again, I don’t know for sure who is unloading, but what I do know is it’s a massive amount of selling and it doesn’t matter if the markets are going up or down, the NQ selling continues. Am I surprised by the sell off? No. The ES has given back less than one third of the Trump 320 point S&P rally.

Monthly OPEX expiry today after this rally should give us decent opening and selling imbalances.

Our Lean

What I know is the ES has a tendency to rally after weak closes, especially when it goes out at a big discount to the S&P cash.

Can the ES and NQ rally? I think they can in the first part of the day but not if the bonds are down and the NQ is weak all bets are off. The stats for today’s November options expiration are semi-positive. Is this enough to hold the markets up all day? I’m not sure but what I am sure of is there’s going to be some big two- way moves.

MiM and Daily Recap

The ES sold off to 6004.00 and rallied up to 6025.25 before opening Thursday’s regular session at 6015.25. After the open, the ES rallied to 6020.25 striking the high of the day at 9:31 AM, then dropped 27.75 points to 5992.75 at 10:42 AM. It rallied 18 points to 6011.25 at 10:55 AM, dropped 11.25 points to 6000.00 at 11:05 AM, and then rallied to 6011.50 at 11:45 AM. From there, it sold off 32.75 points to a new low of 5988.75 at 12:50 PM.

After hitting this low, the ES rallied 10.50 points to 5999.25, sold off 20 points to 5979.25 at 2:00 PM, and rallied 11 points to 6000.50 at 2:55 PM. It then sold off to 5972.00 at 3:10 PM, rallied to 5978.25 at 3:20 PM, and sold off again to 5968.75, with further trades at 5971.00 during the 3:50 closing imbalance. The ES closed at 5977.50 on the 4:00 PM cash close.

After 4:00 PM, the ES traded down to 5964.25, then rallied 10 points to 5974.75, closing at 5974.25 on the 5:00 PM session. This represented a decline of 44 points or -0.73%. The NQ settled at 20,981.75, down 284.25 points or -0.87%. The 10-year note yield settled at 4.425%, rising slightly to 4.449% in off-hour trading following Powell’s comments. Bitcoin edged lower, trading below $90,000 after climbing above $93,000 on Wednesday.

In summary, the ES market mirrored the NQ’s movements, reflecting a tone of persistent sell programs in the Nasdaq from the open through the close. Trading volume for the ES picked up, with 1.474 million contracts traded.

How to read the MIM

Technical Edge

Fair Values for November 15, 2024

SP: 25.94
NQ: 99.53
Dow: 144.17

Daily Breadth Data 📊

NYSE Breadth: 38% Upside Volume
Nasdaq Breadth: 51% Upside Volume
Total Breadth: 50% Upside Volume
NYSE Advance/Decline: 37% Advance
Nasdaq Advance/Decline: 32% Advance
Total Advance/Decline: 34% Advance
NYSE New Highs/New Lows: 114 / 58
Nasdaq New Highs/New Lows: 117 / 204
NYSE TRIN: 0.91
Nasdaq TRIN: 0.43

Weekly Breadth Data 📈

NYSE Breadth: 61% Upside Volume
Nasdaq Breadth: 66% Upside Volume
Total Breadth: 64% Upside Volume
NYSE Advance/Decline: 79% Advance
Nasdaq Advance/Decline: 69% Advance
Total Advance/Decline: 74% Advance
NYSE New Highs/New Lows: 663 / 131
Nasdaq New Highs/New Lows: 899 / 361
NYSE TRIN: 0.63
Nasdaq TRIN: 0.43

Guest Posts:

SpotGamma – Founder’s Notes

Indices showed some red today [Yesterday] , but not enough to wake up IV (implied volatility): November volatility futures closed perfectly flat on the day at 0.00%. A slow drip down allows for IV even to decrease with a declining index, but if we start breaching obvious and major levels (or continue to see session lower-lows) then that should start to cause IV to climb, even without fast markets.

With IV this relatively low now, it becomes easier for it to jump than to crush and that is the dynamic which always causes the tables to turn eventually.

Regarding our own technical view, SPX closed a hair above its 5945 VT (5864 ES), which means that the positive gamma buffer has now been worn down into a neutral state. Beneath this VT, fast markets become the most likely scenario, in which case we could very well start to see an IV spike: SPY -0.64, QQQ -0.69%, and IWM -1.35%.

Yes, equities dropped, but as a reminder, [bidirectional] positive market gamma did its job by keeping that damage relatively contained with only a 2/3 percent drop, and in the process of this, market gamma has now depleted itself.

We know from the basket flows that the bearish pressure was both coordinated and fierce. These types of bearish momentum flows are the strongest known continuation pattern for a single ticker; the only flow signal that would be more bearish would be if index flows were a full pattern match to basket flows. However, index flows were comparatively more choppy and chaotic today, although with early bearish warning from put flows at 11:30am and 12:15pm, and a bearish warning from call flows at 1:30pm, which was confirmed all the way into the close (with index call selling).

For the basket flows shown here below, which we favor for generally being less noisy as default directional guidance, both put flows and call flows were relentlessly bearish from 10 minutes after the open all the way into the close. The only real fakeout here was a bullish call flow pivot at 10:30am, but this was refuted when call flows flattened out (at 11:00am) before reinitiating their continued decline.

What to Watch for Next

While we do not like sitting right on top the VT for the bulls and premium sellers, and we also do not like the way this Combo map looks underneath 5950 (SPX close = 5949.17), the immediate technical context is that the monthly opex is tomorrow.

There should not be too much to worry here with this. For one, it is a lesser opex because it is not Triple Witching. Also, the weekend gap after a monthly opex tends to bring market gamma close to zero (neutral), which can be destabilizing as a drop from heavily positive gamma.

Since we closed near a neutral state today, there should not be much of a penalty here, but the best way to know for sure will be to confirm Monday morning’s model and see where we stand with the SG Gamma Index™. In general, we would consider values above 1 to be materially positive and values under -1 to be materially negative, with theoretical bounds of -4 and +4.

This is just a snippet of daily reports you get from the SpotGamma team. Check out their product using the link below.

Check out SpotGamma’s Products

Trading Room News:

Polaris Trading Group Summary: November 14

Morning Session:

The session began with a focus on key economic reports, including PPI and Jobless Claims at 8:30 AM ET, and anticipation of Jerome Powell’s remarks at 3:00 PM.
David emphasized the SPX’s tendency to mean-revert around the 6,000 strike level, driven by large gamma flows, signalling likely range-bound behavior unless significant exogenous factors emerged.
The initial “Line in the Sand” (LIS) was set at 6020 +/- 5 points, indicating a key zone for potential support/resistance.

Early Trades:

By 9:37 AM, David noted a long trigger in NQ (Nasdaq Futures), but conflicting price paths in ES (S&P Futures) and NQ were highlighted as ES traded below its opening range low.
The first key test at the prior low of 5991.75 saw buyers stepping in to push prices back toward VWAP (Volume Weighted Average Price), creating opportunities for buyable pullbacks with risk defined at the low.

Midday Observations:

A slower grind developed, aligning with expectations of a Cycle Day 2 rhythm as outlined in the Daily Trade Strategy (DTS).
Price behavior remained confined within a multi-day consolidation, testing lower targets between 6010-6005 while showing relative weakness in ES compared to NQ.
The LIS zone held firm as resistance, and David opted to stand aside due to the lack of a clear trade edge.

Afternoon Insights:

Price continued to show bearish tendencies, with bears maintaining control unless the 6000-6005 zone could be reclaimed.
Jerome Powell’s comments stirred rate speculation, but market reactions were muted, described by David as a “non-event.”
Late-session sentiment noted potential opportunities for dip buyers, though the day concluded within a well-balanced range without major directional moves.

Key Takeaways:

Gamma Flow Awareness: Recognizing how large gamma influences can anchor price action near key strikes was crucial to framing expectations.
Responsive Trading: Successful navigation of pullbacks to VWAP and lows around 5991.75 offered actionable trade setups with manageable risk.
Patience & Discipline: Standing aside during unclear market conditions prevented forced trades, a key lesson for maintaining consistency.
Macro Influence Awareness: Powell’s remarks highlighted the need for traders to remain adaptable to potential market-moving events, even when immediate impacts are limited.

Overall, the day was characterized by disciplined execution within a challenging, range-bound environment, with notable adherence to the predefined strategy.

DTG Room Preview – November 15, 2024

Market Recap and Key Updates:
- Federal Reserve: Fed Chair Jerome Powell emphasized the resilience of the US economy, suggesting no urgency to reduce interest rates. Market response saw the probability of a December 25-basis point rate cut drop to 58.6%.
- Equities: US stocks dipped Thursday following Powell’s speech. Overnight futures are down, as investor sentiment weakens. Vaccine stocks, including Moderna (MRNA) and Novavax (NVAX), declined on reports of controversial Trump administration appointments.
- Tesla (TSLA): Shares fell 5% after reports that the $7,500 EV tax credit will be eliminated under the new administration.
- Oil: Prices declined 3.5% this week on oversupply concerns and reduced Chinese demand, returning to October lows.
Corporate and Economic Data:
- Earnings Watch: Alibaba Group (BABA) reports premarket.
- Economic Calendar: Key data releases today:
  - Retail Sales, Empire State Manufacturing Index, Import Prices (8:30 AM ET)
  - Capacity Utilization & Industrial Production (9:15 AM ET)
  - Business Inventories (10:00 AM ET)
- Fed Speakers: Susan Collins (9:00 AM ET) and John Williams (1:15 PM ET).
Market Technicals:
- Volatility: ES 5-day average daily range holds at ~49 points.
- Trade Levels (ES):
  - Resistance (R): 6074/79
  - Support (S): 5790/95
- The ES has moved back into the middle of its uptrend channel, leaving room for both bullish and bearish opportunities.
Additional Notes:
- Overnight large trader volume shows a slight bullish divergence but is too light to signal a definitive whale bias.
For the latest updates, visit the DTG Member Forum.

ES – Week over Week

Last week were talking extending to 6200 and 5860 holding, we didn’t do any of those during the week. The market continue to use its energy to hold the new highs.
50% retracement is that 5891 line. If that breaks lower next is 5670 area. Upside is to regain 6000

NQ – Week over Week