Remember not to let the winners turn into losers.
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Our View
As we approach the holidays, I want to take a minute and just thank all of our subscribers for being a part of the Opening Print. As trading volumes are drying up and families are getting into town, readership naturally tends to dip around the holidays.
In that light, we will keep the OP fairly light over the next few days, as we too look to enjoy this time of year.
As for the markets, everyone wants to know: Will we have a Santa Claus Rally?
If he comes to town, it may give equities a short-term boost, but it’s not going to change the status quo very much. On the flip side, a 10% pop would be something that changed the outlook — or really, any move over 4180.
If I had a gun to my head, I’d say this rally is not over. As the volume drops, the ES will rally.
Our Lean — Danny’s Take
As of 8:00 am ET, we have some weakness across the board, with the GDP reading at 8:30. If we open lower on the day, I am looking to buy weakness. However, keep an eye on the NQ. That has been steering the ship lately.
If the buyers step in, I think the ES could target 3940 to 3960 over the next few days with an outside chance of 3990. If the ES starts to reverse, the levels I will be watching are 3880 to 3870, then 3855.
If we lose 3855 and can’t regain it, the bullish thesis is off the table.
MiM and Daily Recap
The ES traded up to 3884.25 on Globex and opened Wednesday’s regular session at 3876.25. After the open, the ES pulled back below the VWAP down to 3870.50 and then rallied up to 3917.50 at 11:14. After the high the ES sold back down to the 3898.50 level at 12:21, rallied up to 3912.75. From there, it fell back to 3898.50, rallied back up to a new high at 3918.75 at 2:13 and pulled back to 3900 at 3:11.
The ES traded in a 5 to 6 point range for the next 30 minutes and traded 4003.30 as the 3:50 cash imbalance showed $2 million to buy and dropped down to the VWAP at 3896.50 at 3:53 and traded 3906.50 on the 4:00 cash close. After 4:00, the ES rallied further, settling at 3914 on the 5:00 futures close, up 56.50 points or 1.47% on the day.
In the end, all I have to say is the rally was overdue but got sloppy late in the day. In terms of the ES’s overall tone, it was a big rip that caught the shorts offside. In terms of the ES’s overall trade, volume was lower at 1.46 million contracts traded.
Technical Edge
- NYSE Breadth: 86% Upside Volume (!)
- Advance/Decline: 77% Advance
- VIX: ~$20
The VIX continues to say “no worries,” while the price action has a different message.
We got our oversold bounce yesterday as equities pushed higher. No surprise there, but can we squeeze a bit more juice out of the long side?
We got an excellent entry on Starbucks yesterday and were able to trim our WMT position. That ought to stuff a few stockings. Let’s keep it short with a look at the indices.
S&P 500 — ES
From yesterday:
“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…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.”
With that in mind, there is absolutely no surprise in my mind that the ES is seeing some overnight selling pressure as it made a Globex high of 3919.75 — one tick from 3920.
From here, see if the ES can regain the 50-day moving average near 3895 ahead of the open. If so, the Globex low could be a pivot area during the RTH session.
However, the main downside level is 3855 — last week’s low. A break of that puts 3841 to 3848 in play, but more importantly, a close below this level leaves the ES in a weekly-down state and vulnerable to further losses.
SPY
Yesterday’s rally sent the SPY into the gap-fill and 50-day moving average. Unlike the ES, it did not rally to its key pivot area, but in that zone, it also finds the 10-day, 10-week and 21-week moving averages.
In other words, a lot of overhead resistance and the No. 1 reason why I am untrusting of the rallies — unless this becomes resolved.
On the upside, watch yesterday’s high at $387.41. On strong breadth, a daily-up rotation could put $389 to $390 in play. On weak breadth, this area could act as a cash-flow reversal level.
On the downside, $382.25 to $382.70 is a key zone. That’s yesterday’s low and the gap-fill. If buyers can’t defend this level, last week’s low is in play at ~$381.
Open Positions — Do NOT let the winners turn into losers!!
- 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. Trimmed ¼ at $145.25 and ¼ at 145.75.
- B/E Stop. Look for $146.50 to 147.25 on the next trim.
- SBUX — Long from $96.50, with a ¼ to ⅓ trim at $99 yesterday.
- For the calls, long the Jan. $100 calls from $1.75, with a ¼ to ⅓ trim at $2.65 yesterday (+50%).
- B/E stop for both positions now and ideally looking to trim down to ½ to ⅓ on $99.50 to $100 area (test of the declining 10-ema)
- UUP — Ideally needed a close back over last week’s high of $27.95 and we closed AT $27.95. Long against $27.75 is fine with a ¼ to ⅓ trim at $28.15 to $28.25. Ideally looking for $28.40+
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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