The question is, how far can they push the market?
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Our View
There seem to be dark clouds floating over the S&P as we go onto the holidays. This is not what I want and I am sure it’s not what you want either. This is the time of year that families get together and celebrate. Time and time again, the US has made big comebacks after economic setbacks and I am sure we will this time. The PitBull has long called the US the tech leader of the world and he’s right. It will help lead us out of this mess when the time is right.
I said this over 9 months ago, this is not the time to make major personal finance decisions unless you are 100% sure about what the investment is. I have a family member that put up over 50% of her retirement money in a deal that no matter what, you got your original investment back — that the money was “secure.” But like that nonsense from FDX, none of that money is coming back.
I have a group of friends I grew up with, hard-working folks, some that are still working. I think of all the generations that are still prevalent are the older baby boomers. We have seen it all: Wars, housing crisis, bank credit crisis, stock market crashes and new highs, pandemics, high inflation — you name it. Despite them all, they continue to work hard. It’s like it’s driven into them that they have always worked and someday want to have enough dough to retire so they just keep chugging along.
Our Lean — Danny’s Take
Despite volume dropping going into the final sessions of the year, that doesn’t mean there is going to be any shortage of news. Today is the VIX expiration which should add some fuel to the fire.
We all know the markets are oversold, but the question is, can the ES “hold the rally?”
Our Lean is for higher prices and thin to win. That doesn’t mean there won’t be rallies to sell into…it means we think the ES is trying to hold up after a big four-day skid. My upside levels include 3890 to 3900. Above that and 3920 to 3925 could be a brick wall.
MiM and Daily Recap
The ES traded down to 3803.50 on Globex and opened Monday’s regular session at 3836.75. The ES pulled back to the 3922.25 at the 9:51 level and then traded up to 3865.75 at 10:38, back and filled in 6-handle range for the next 20 mins, and dropped down below the vwap down to a higher low at 3832.25 at 11:29.
After the pullback, the ES rallied up to a new daily high at 3866.50 at 1:40, dropped to the 3846 level at 3:03 and rallied back up to 3859.75 at 3:40. The ES traded 4856.50 as the 3:50 cash imbalance ‘flipped’ from $175 million to buy to almost $1 billion to sell and traded 3849 on the 4:00 cash close.The ES went on to settle at 3853.50 on the 5:00 futures close, up 4 points or 0.1% on the day.
In the end, the $100 billion in rebalancing — ie buy bonds / sell stocks — has totally kneecapped the S&P, which is down 9% in the last 5 sessions. In terms of the ES’s overall tone, it made a series of higher lows but faded late. In terms of the day’s overall trade, the airports were busy and the volume was lower at 1.48 million contracts traded.
Technical Edge
- NYSE Breadth: 64% Upside Volume
- Advance/Decline: 52% Advance
- VIX: ~$20.75
S&P 500 — ES
My gut says not to be too trusting of the rallies, even if the market puts together a multi-day gain. That said, we are oversold and the market has been finding its footing.
See if the ES can reclaim the 50-day at ~3890. The better R/R selling opportunity is at 3920-ish, where the ES finds a key pivot level and the declining 10-day moving average.
On the downside, keep 3855 in mind. That’s last week’s low and we’ve closed below it in both sessions so far this week. It also marks today’s Globex low. If the ES loses 3855, it’s not a good look.
SPY
Trading $383.60 in the pre-market now, the SPY is up about 80 basis points. Gap-ups in this type of tape are not my favorite setups from a long perspective.
Watch $382.23 — yesterday’s high. A slight gap up above this level and a move back below it could give us a nice cash flow short with our stop initially just above the session high (assuming it’s reasonable).
Otherwise, a gap-and-go could open the door to $386.50 (the 50-day), the gap-fill at $388 and then finally ~$390. Like the 3920 area in the ES, the $390 level in the SPY is a key pivot area and roughly where the declining 10-day moving average comes into play.
That may be something that comes later this week, as it would require a 2.5% rally to get there today.
QQQ
Lagging the other indices this morning, the QQQ is not trading above yesterday’s high of $271.32 — at least not yet.
Keep that in mind as a potential “short cash flow” trade this morning, particularly if it’s the weakest of the bunch.
LNG
I nibbled LNG yesterday with a small stake (roughly ¼ position), but was hoping to get that $150 test to really build it out. I will not include it in the open positions because of that, but it’s one that I’m watching today through Friday very closely.
We’ve been flagging this one for a bit now, but just keep an eye on it if we break yesterday’s low of $150.90. Very solid R/R if we get it.
Dollar — UUP (DXY is fine too)
Following up on yesterday’s dollar setup, we now have two levels to watch: $27.95 and $27.81.
$27.95 is last week’s low. If the UUP can reclaim that level today, we can get long with a stop-loss just below yesterday’s low — say $27.75. That’s what I’ll be watching today.
NKE
Gapping higher on earnings, NKE is trading $115 in the pre-market. Just keep an eye on this one today, as it topped at $116.50 last week when it was slammed by the 50-week and 200-week moving averages.
That may give shorts some ammo for a cash flow trade today.
Open Positions —
- Numbered are the trades that are open.
- Bold are the trades with recent updates.
- Italics show means the trade is closed.
- WMT — ½ size & long from 142.75. Looking to trim $145 to $146+ | Stop at $141.
- An ideal trim would be at the declining 10-day moving average and if we see that, trimming ½ to ⅔ would be the ideal approach, IMO. Call me too conservative, but I’d rather put a couple bucks in my pocket than pay it out to a cranky market.
Go-To Watchlist
*Feel free to build your own trades off these relative strength leaders*
Relative strength leaders →
- LNG — keep an eye $150
- SBUX — 10-week ema at $96.75
- DE — gap-fill & 10-week would be attractive for potential longs
- HON — weekly
- CAH
- LMT, RTX, NOC
- MET — weekly
- GIS
- CI
- MCD — weekly
- ENPH, FSLR, CEG — solar has strength
- VRTX, UNH, MRK
- XLE — XOM, CVX, COP, BP, EOG, PXD (Weekly Charts)
Economic Calendar
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