Futures roll, CPI and FOMC will dominate the tape.
Follow @MrTopStep and @BretKenwell on Twitter and please share if you find our work valuable.
Don’t Forget: The Long-term performance of the S&P 500, some longer-term setups, and 5 red flags that showed up before the 2022 bear market.
Our View
If you have been following the MIM graph and chart then you already know how much MOC buying has been going on for the last several weeks. And you have also noticed it flip to the downside over the last few sessions.
Further, if you follow the December seasonalities stats, then you also know there is big two-way flow going into the end of the year. I’m not going to repeat what we will be looking at this week. I have written about it several times.
Futures roll today. CPI print is tomorrow morning. Fed is on deck on Wednesday afternoon.
Keep your chin straps handy.
Our Lean — Danny’s Take
The ES sold off 30 points in the final 40 minutes. When the ES closes as it did, a lot of the momentum traders want to go short, but I have to remind everyone that when the ES goes out at a steep discount to the S&P cash, it usually goes up.
Our lean is if the ES gaps lower on Globex, I would look to buy it. If the ES is higher on the 9:30 futures open, I would look to continue to trade the range.
Do I think there will be an end-of-year rally? I think there could be, but I’m not expecting a huge rally at the moment. Yesterday’s $3.2 billion to sell may not be the last big sell imbalance. Right now it is water in the bathtub, as they say.
Let’s see how it goes today. I still think cutting back is the right plan; AKA trade less, pick your spots better, and use a smaller size. Less trading really forces you to be more selective and take higher-quality R/R setups.
Note: According to my good friend Rich, who runs HandelStats, when it’s a down year and the first 10 days of Dec are down, then the 3rd week (this week), has been up 18, down 3. The caveat of this observation is the Fed and CPI print, which will be the driver.
MiM and Daily Recap
The ES traded up to 3982.50 on Globex and sold off down to 3934.50 at 8:32 am after the PPI data and opened Friday’s regular session at 3952.25. After the open, the ES sold off down to 3944 and rallied up to 3972, and dropped back down to 3950 at 10:00. The ES climbed 28 handles before the next hour, then dropped to 3965 at 11:15. It made a session high of 3979.50 at 11:54, then began to break down in afternoon trading.
It traded 3964 at 3:17 as the MIM went from $350 million to sell to over $500 million to sell. The ES traded 3943 as the 3:50 cash imbalance showed $3.2 billion to sell, traded 3936 on the 4:00 cash close, and after 4:00 sold off down to new lows at 3931 and settled at 3931.50, down 34.25 points or -0.86% on the day.In the end, if I was right about anything it was the expected chop. After an early rip, dip and rally the markets ran out of gas and then were hit with the $3.2 billion to sell on the close. That sell imbalance was part of the plan even before the markets opened. In terms of the ES’s overall trade, volume was low most of the day but picked up late as 1.66 million contracts traded.
Technical Edge
- NYSE Breadth: 36% Upside Volume
- Advance/Decline: 28% Advance
- VIX: ~$24.25
Chop day on the way? With so many big events in the next 72 hours, I wouldn’t be surprised if today — along with the futures roll — creates a very bumpy, frustrating trade.
Keep that in mind if you’re wading into the water today.
S&P 500 — ES
As you can see on the right, the ES continues to hold the 10-week and 21-week moving averages and the 3920 to 3940 area.
As you can see on the left though, the ES is struggling to regain the 10-day and 21-day moving averages.
On the upside, keep an eye on 4000. Clearing this key level puts it back above the daily moving averages and puts 4024 back in play, followed by 4040.
On the downside, 3955 to 3960 is support. A break of this area opens the door back down to 3940, then 3920.
SPY
Slightly sloppy, but simply speaks to the choppiness lately. We have a fairly clear two-day range in the SPY between $393 and $397.50.
A break of either range that doesn’t reverse can create a continuation trade. Above $397.50 to $398 opens the door to $400. Below $393 puts last week’s low in play at $391.64. That’s followed by the key $390 level.
LNG
I’m not sure we’ll see $150 in LNG this week, and if we get close, I will try to flag it again, but this is one to keep an eye on IMO.
AMGN
Weekly chart (right) shows a gap-down toward the 10-week moving average. Daily chart (left) shows a bit deeper of a fade could land AMGN in the $265 to $267.50 area. There it finds the 50-day moving average and breakout level.
I’m inclined to wait for the latter (daily setup) rather than the former (weekly setup). That’s mostly as we’ve had a great run and our open positions are dwindling nicely ahead of a few big market events this week.
Your call, but I just wanted to put this one out there.
Open Positions —
- Numbered are the trades that are open.
- Bold are the trades with recent updates.
- Italics show means the trade is closed.
- TLT — Trimmed down to our final ¼ or ⅓ at $108.50. A complete exit is okay too. Those still holding can fish for the $110 to $111.50 area. Fell hard on Friday. I personally did not get a reload at the 10-day.
- IBM — Daily-up over $147.17 was the entry. $145.50 is our stop. Trimmed ⅓ at $149.50+ (pre-market is fine). Ideally down to ½ if we see new highs over $150.50.
- Stop at $145.50 or B/E for less aggressive traders (B/E Stop hit)
- CEG — Trimmed ⅓ at $93. Raise stops from $86 to $89. Looking for $95 to $96 for small trim (down to ½). Down to ⅓ if we see $97.50+
- Ulta — Booyah! Down to ½ or ⅓ here — likely ⅓ as per yesterday’s update. I’d love to see $488 on the remainder.
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
Relative strength leaders →
- LNG
- CAH
- Retail — TJX, WMT, ULTA
- SBUX
- DE
- CCRN
- AMGN — Gapping down on the day. See how it handles the 10-week moving average. $265 to $267 is the breakout level and the 50-day moving average.
- MET
- GIS
- REGN
- CI
- MCD
- ENPH, FSLR — solar has strength
- VRTX
- UNH
- MRK
- XLE — XOM, CVX, COP, BP, EOG, PXD (Weekly Charts)
Economic Calendar
Comments are closed