There was a lot of two-way flow on Wednesday. The big investment firms and ETFs were selling the losing stocks and marking up the winners. That’s just how it works. I’m going to keep this short and sweet. I think the ES rallies on Globex and if it gaps up, I think it may keep going up. I called the big late-day stop-run up to 4794 and my guess is if the futures are firm, the next level of buy stops comes in from 4797.75 up to 4818 and then possibly pushes up to 4850 on Friday.
I want to say this again, if you have big profits and feel like taking them, that is 100% OK. I know everyone is thinking about the last trading day of December, but I’m looking into January and I see the ES going up in the first two weeks of the year.
As the PitBull always taught me, trade your position. Don’t sit there and watch big profits turn into small change.
The ES opened Wednesday’s regular session at 4781, traded up to 4791.75 at 9:42 and sold off 22 points down to 4770 at 10:17.
After the low, the ES traded back up to a double top at 4785 and dropped 10 handles down to 4775 at 11:34. From there, it traded sideways to down and traded up to a higher low at 4772 at 12:35. That low set up a rally back up to 4793.50 at 3:38.
After a slight pullback, the ES traded 4796 — the session high — as the 3:50 cash imbalance came out showing $1.8 billion to buy. The ES quickly went offered and traded 4784.50 on the 4:00 cash close. On the 5:00 close, the ES settled at 4784, up 3 points on the day.
In the End
The ES acted weak until after 3:00 when the futures started to firm up but gave up most of its late-day gains. In terms of the ES’s overall tone, it acted mixed due to the late two-way flow. In terms of the ES’s overall trade, volume was low at 833,000.
Wednesday’s breadth numbers were nearly identical to Tuesday’s results. When we look at the charts, you’ll see why.
I called Tuesday a “no-day” yesterday and with Wednesday’s action, we could call it one too. We’re in a slow period with the year-end trade in full force. Because we don’t have a short trading week for the New Year, the markets will be open for the next two days. However, that doesn’t mean volume will pick up meaningfully.
Below is the S&P 500 and S&P Futures. If a chart is worth 1,000 words, these do a wonderful job illustrating just how tight (and slow) the action has been.
Clearing $478.60 would give us a daily-up in the SPY. However, over $478.80 clears this week’s high and could put a larger breakout in play.
If we get a break of the two-day low at ~$475.90, it could open the door for a test of the 10-day moving average (first on the 4-hour chart, then potentially on the daily).
Given the low volume though, it wouldn’t be crazy to think we have a “thin to win” situation on our hands with a breakout over this week’s high and a slow grind higher.
For that to happen though, we need to clear ~$479 and hold that level.
This is what it looks like for the ES futures, with the level to clear up at 4798.
I would love a situation where the S&P gives us a bit more range to work with. Ideally I’d like to settle into a position and let it run through the day.
I don’t know that that happens, though.
As far as individual stocks go, this has been a very quiet week for us. We had some early success with AMD and some cash-flow opportunities with AVGO and TSLA, but otherwise we’re waiting for a number of stocks to reset after a nice run.
During this period of waiting for a reset it’s important not to force trades. That is where many traders give up their hard-earned gains from the prior rallies. Knowing when not to trade to trade is as important as knowing when to trade.
For me, the “reset list” contains a lot of our recent winners and some additional ones as well. Names like PG, UNH, ABBV, ZTS, CSCO and others. A few of those find their way on today’s list too.
AbbVie is looking a little tired up here and has some bearish divergence on the RSI.
I’m not a big fan of shorting into strength, but if we get an open above the prior day’s high and fail to hold it, we could have a cash-flow reversal on our hands.
Cisco is a similar situation. Looks tired after yesterday’s pull from the high.
An open above or near the high that takes out $64.29 that can’t be sustained, could be a reversal opportunity.
Remember FuboTV? An open below $15.18 or Wednesday’s low at $15.01 that’s reclaimed could give us a bullish reversal.
I’m watching Micron with smaller size as it gaps lower at the open. Let’s see if the 10-ema on the 4-hour chart can hold as support, along with this $94 area.
Could be a bounce setup, but if support fails, it may need to unwind a bit more. If I take this, I will do it with smaller and/or lotto size.
Disclaimer: Charts and analysis are 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!