The ES and NQ are down as a US rail strike looms and amid widespread protests in China over the country’s zero-tolerance approach to Covid-19. The latter also weighed on with the Hang Seng Composite, which fell 4% at one point and ended lower by 1.6%.
Crude oil prices fell again to a low of $73.60, its lowest price since December 2021. Credit Suisse shares fell further and its riskiest bonds sold off as the bank undertook a new capital raise.
These are just a few of the things the markets face going into the final trading days of November and the first trading day of December. As if the headlines weren’t enough, we have the monthly jobs report on Friday and Powell speaks on Wednesday.
Our Lean — Danny’s Take
I know a lot of people think the S&P is going to keep going up, but it’s been going up for the last eight weeks and the news seems to be shifting again.
Seasonally, the ES has an average gain of 1.6% in December. At the same time, stocks have risen during the last five trading days of December and the first two days of January 75% of the time since 1945, according to CFRA — the so-called Santa Claus Rally.
This year, that time period starts on Dec. 27. The average Santa Claus Rally has boosted the S&P 500 by 1.3% since 1969, according to the Stock Trader’s Almanac.
All the above is true, but the ES is coming off an 8-week rally and as you can see, not all the news is good and there is going to be a high level of end-of-the-month rebalancing. Our Lean is we cannot rule out buying the open for a scalp, but we think today is a sell-the-rallies day.
Support: 3990 to 4000, then 3975 to 3980. Resistance: 4025, 4050. (Charts below).
MiM and Daily Recap
In the end, the markets made a push to the prior week’s high in the overnight session, but couldn’t continue higher on Friday’s short session. In terms of the ES’s overall tone, the NQ again acted as an anchor to the ES. In terms of the day’s overall trade, volume was low, as expected, at 564.8K contracts.
NYSE Breadth: 57% Upside Volume
Advance/Decline: 64% Advance
The dollar is making new lows on this current decline, while bonds are up in the pre-market. Aside from booking some more profits in our short dollar position, this setup tends to bode well for equities, even though the S&P is coming into the session under pressure.
I am interested in seeing how the market handles a lower open. Let’s take our time and let price lead the way. We don’t want to start the week on a negative note.
S&P 500 — ES
The ES is fading down to the 4000 area ahead of the open. I’d like to think this area acts as support, with the 50% retracement of last week’s range at 3993. For now, that’s where ES has bounced from.
If it takes out the Globex low, look for support in the 3975 to 3980 area. That’s where we have the 10-day moving average and the 61.8%.
If we get that kind of dump to start the week, I imagine they at least give us a bounce to work with.
On the upside, 4024 is clearly relevant, as it marks Friday’s low and the overnight high. A move above this area puts 4050 in play.
The Bigger Picture:
Bulls need active support to continue to hold. Currently, that’s in the 3975 to 3980 area. Below that and 3940 to 3950 may be called upon.
On the upside, we have a 2x weekly high of ~4050. If we can rotate over this level — and the declining 200-day moving average — it puts 4135 to 4150 on the table.
SPY — Daily
The SPY has a similar look. Bulls need the 10-day moving average to hold as support on the downside.
On the upside, they need to clear $402.30-ish. Ultimately, we want to see a push above the 200-day moving average and a gap-fill at ~$408.50.
A break of the 10-day that’s not repaired puts $390 and the 21-day back in play.
SPY — Weekly
A prior doji week was met with a push higher last week, although not one that could really rotate over the high.
On the downside, the SPY needs to hold the 21-week and 10-week moving averages, while a push up to the 50-week would be ideal.
*Feel free to build your own trades off these relative strength leaders*
Numbered are the trades that are open.
Bold are the trades with recent updates.
Italics show means the trade is closed.
Open Positions —
TLT — Now ⅓ to ½ position here. Raise stops (B/E at minimum) and looking for $104.50 to $105 next.
CCRN — down to ⅓ or less. Exit at $36+ or consider holding for $37.50 to $38. Stop at $32.
QQQ — Just down to runners. #cheers
DIA — Just down to runners, if you want. #Cheers
Gold — A traction-less trade thus far, although we were able to cut ½ the position above B/E and get our exit about 1760.
Can be down to ⅓ or less or out completely.
UUP — Trimmed again on continued fade. Down to ⅓ to ½. Trim down to runner or exit the rest if we open below last week’s low.
For DXY, I would love to exit the rest at the 200-day moving average. (at 200-day now in the pre-market).
Disclaimer: Charts and analysesare 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!