by Danny Riley

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Our View

There are major economic reports today, but the Fed blackout period is over in a big way. Today starts with Governor Christopher J. Waller discussing the economic outlook at 8:15 a.m. ET during the Yale University CEO Summit, followed by Governor Stephen I. Miran speaking on the inflation outlook at 9:30 a.m. ET at Columbia University. Vice Chair for Supervision Michelle W. Bowman then testifies on oversight of financial regulators at 10:00 a.m. ET before the U.S. House Financial Services Committee and delivers a speech on bank supervision and regulation at 12:30 p.m. ET at the Florida Bankers Association Leadership Luncheon.

Afternoon releases include the FOMC minutes from the December 9–10 meeting and the Senior Credit Officer Opinion Survey on Dealer Financing Terms, both at 2:00 p.m. ET, with an FOMC press conference at 2:30 p.m. ET. The evening concludes with Chair Jerome H. Powell giving brief remarks and participating in a panel discussion on George Shultz’s economic policy contributions at 8:00 p.m. ET at the Hoover Institution.

In addition to the massive Fed speak, today is the start of the Fed’s new quantitative easing, mid-month rebalance, week 2 options expiration, option collars, and the index rollover. With the market’s big push up, I think the Fed headlines will be front and center.

Our Lean

There could be a lot of static today, and with the index markets up so much, I can’t rule out some shake & bake. While I continue to think higher prices, I am also concerned about the Fed headlines and some type of drop. We already know there are several Fed hawks, and it is unknown how that may play out after the headlines hit the tape.

That said, even if the ES and NQ and YM do pull back/sell off, I still think it’s a buy. The notional value of today’s week 2 options expiration ranges from $1.2 trillion to $1.5 trillion, and next week’s December triple switching is estimated at $4.5 trillion.

Our lean: Be patient. If the ES gaps up — which it probably will — we could see some selling, but I’m long and staying long. If the ES drops 30 to 50 points, I’ll be looking for long scalps. My guess is that after the smoke clears, the ES and NQ markets will start going back up, but we could see a lot of two-way price action.

There are a ton of buy stops above, and you know that NO STOPS GO UNTOUCHED IN THE S&P FUTURES. New highs are coming.

Guest Posts:

SpotGamma Founders Note:

Get instant access to our partners’ real-time market data and insights not available anywhere else. Here is last night’s Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Founder’s Note:

ES futures are off 20bps, NQ -60bps, however RTY is +22bps. This after AVGO missed (-5.8% AH).

Retail Sales 8:30AM ET.

Combining AVGO results the ORCL drubbing (-11% y’day, down another 1% AH’s) has tech dragging, but the positive RTY & DIA suggest equity rotation in play (vs asset rotation i.e. out of equities into bonds). SPX IV’s are non-reactive to these earnings, too, suggesting that the trend higher remains in tact.

Speaking of trends higher, IWM has broken to fresh ATH’s. We think these fresh highs are unlikely to be faded in 2025 as we head into a seasonally bullish time frame, driven by holiday-driven vol contraction.

ES off 20bps implies SPX 6,880, which is only 50bps from all time highs (6,920) set back in Oct. What we see on the TRACE map is mild positive gamma (i.e. no 99th %’il strikes), but its spread over a fairly wide range of from 6,850 – 6.900. This suggests some support in here, and while its not massive, it clouds a clear path lower for shorts. If the gamma below was negative (red), then we’d be more open to a sharp draw down. <6,860 you see that strike gamma drop (we’d be neutral), but gamma does not flip to materially negative until <6,800 (we’d lean short).

Overall, should SPX close above 6,900 then we think it marks positive gamma tied to some longer dated positions which could aid a final year-end rally.

On the topic of IV’s, we’ve essentially hit “Holiday Vols”. We had yesterday flagged a swath of “cheap” ~10% IV’s around 20-25 delta, and that area has now expanded to include the end-of-year options for delta into the 30’s. As with yesterday, maybe you don’t think the market rallies, and thats fine, but that does not change the fact that these upside strikes are objectively cheap. You can see there is a path of expirations from 12/18 to 12/26 that are not quite as cheap (think “basement vs “sub basement”), and that is due to CPI/NFP plus some expirations.

Being clear, puts are cheap too. However, we are heading into a weekend, then VIX exp/OPEX next week, then Xmas holiday, then New Years. Those holiday’s serve vol contraction, which is a time-decay toll for options holders. Yes, the toll is low because the puts are cheap, but the vol contraction should help as a vanna-based tailwind for stocks which is why we favor the calls over puts.

Those calls above being so cheap is a signal that traders are not looking to long them, and with IV Ranks <10% its clear traders want to short options over the holiday. This anti-long options position is true not only in SPY & QQQ, but the breakout leader IWM. We also flag the “positive gamma at longer dated expirations” above, and the big dealer long calls at ~7k (+ 12/31 JPM strike), and we get the picture that dealers are offering calls here to offset 7k decay.

Lastly, we had to bring up silver (again). We discussed put flies into the “Nearly 100% IV Rank” period of 12/1, and that marked a fleeting 1 week period of price consolidation. This admittedly offered a very brief window of put-fly profitability, with our personal put flies currently having negative PNL (for full transparency). In the 3 days since FOMC silver has added another 9% (!), but the SLV vols are doing something quite odd… they are shifting from extreme calls to neutral. That is odd given the 9% rally.

Changing the grid to Call Skew vs Put Skew, we see can see those skews are “getting wing”, meaning the skews are both rising. This skews rising appears to be from at-the-money IV’s declining. Because this is ultimately a commodity (which can have different vol drivers & characteristics from stocks), we are going to pause from speculating on why those ATM IV’s are dropping, but its interesting given the 9% move higher, and suggests that maybe some larger players are starting to monetize this move and/or play the very high vols. Maybe its time for SLV to take a pause….

Get instant access to our partners real-time market data and insights not available anywhere else. Here is last night Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Market Recap

The long and short of the Fed saying that they are going to start buying T-bills is another way of saying they are going to start quantitative easing. Once this started during the 2008 credit crisis, it supplied so much liquidity that every time the ES and NQ fell, they got bought. Overall, from the QE1 announcement through the end of QE3, the S&P 500 rose +113%, from 903 in Dec 2008 to 1,920 in Oct 2014. The Nasdaq Composite rose +120%, from 1,444 in Dec 2008 to 3,170 in Oct 2014, with stronger tech-driven gains post-2010.

The ES traded down to 6817.50 after Powell answered a question from a reporter who asked if buying T-bills was going to work. His response was that he was not sure. From there, the ES rallied up to 6876.75 at 7:40 am, traded 6862.25 at 8:55 am, rallied to 6873.25 at 9:20, and opened Thursday at 6868.00, down 24 points or -0.35%.

After the open, the ES pulled back to 6861.50, traded up to 6875.00 at 9:35, and then reversed 37 points down to 6838.00 at 10:00. It was that sell program that set up a pre-QE rally. From there, the ES smoked its way up to 6884.75, dropped under VWAP down to 6877.00 at 10:50, and back-and-filled in a 10 to 15-point range above VWAP until 11:30.

Over the course of the next 2 hours and 10 minutes, the ES rallied all the way up to the old resistance at 6903.00 at 1:40, pulled back to 6895.00 at 1:55, and then started taking out the buy stops above 6900.00, reaching 6909.25 at 2:50. It pulled back to 6896.75 at 3:35 and traded 6899.50 as the 3:50 cash imbalance showed $3.7 billion to buy. It traded 6908.00 on the 4:00 cash close and RIPPED up to a new high at 6924.25 at 4:15, pulled back to 6917.00, and at 4:50 did another RIP up to 6929.00, settling at 6907.25, up 15.50 or +0.22%.

The NQ settled at 25,713.50, down 85.50 points or -0.33%, and the YM settled at 48,746.00, up 639 points or +1.33% on the day.

In the end, I sincerely believe the Fed’s QE talk forced buyers back into the index markets. In terms of the ES, NQ, and YM’s overall tone, I think the turning point showed up at 10:00 am, and all the back-and-fill midmorning was followed by one buy program after another. In terms of the ES’s overall trade, volume was higher at 1.7 million contracts traded.

Beyond the systematic buying, covering hedges, stops, and a big closing buy imbalance all added up to a big push higher. But what happened late that no one was talking about was a headline that came out at 2:18.

Trump Administration Plans to Boost Tax Break for Corporations

(Bloomberg) — The Treasury Department is preparing to release a corporate tax workaround that would deliver large tax savings to companies, including Salesforce Inc. and Qualcomm Inc.

The index markets were already going up, but the headline added to the late buying spree.

MiM

Market-On-Close Recap

The market-on-close auction opened decisively bid and stayed that way through the bulk of the window, with the first meaningful print at 15:51 showing a strong $3.49B net buy imbalance. From that point forward, buyers clearly controlled the tape, peaking early and then gradually bleeding off into the close as natural offsetting sell interest emerged. The character of the auction was front-loaded, with the most aggressive participation occurring between 15:51 and 15:53 before momentum slowed and rotation took hold.

Sector flows tell a clean story of institutional accumulation rather than random rebalancing. Communication Services and Technology led the auction, each posting buy-side leans well above +70%, with Communication Services reaching +97% dollar imbalance — a textbook wholesale buy signal. Utilities, Real Estate, Consumer Defensive, and Financial Services also showed strong positive leans in the +70% to +80% range, reinforcing that this was broad, risk-aware allocation rather than a narrow momentum chase. These sectors reflect longer-duration positioning and balance-sheet flows, not just intraday speculation.

On the flip side, Industrials stood out as the lone sector with a deeply negative dollar imbalance, registering a -57% lean, despite a high symbol count. That divergence highlights heavy selling pressure underneath the surface even as other sectors absorbed capital. Healthcare and Consumer Cyclical also showed mixed behavior, with dollar flows positive earlier but symbol leans slipping below -50%, signaling rotation rather than conviction buying.

At the single-stock level, mega-cap leadership dominated the tape. MSFT, AAPL, NVDA, GOOGL, META, and AMZN all featured prominently, anchoring the Technology and Communication Services flows. Semiconductor exposure was particularly notable, with NVDA, AVGO, and TXN reinforcing the growth-complex bid. Financial exposure skewed toward credit and large banks, while Aerospace & Defense names like BA and RTX reflected targeted institutional adjustments.

As the clock wound down toward 16:00, the imbalance narrowed and briefly flipped negative, confirming that the auction evolved from aggressive accumulation into orderly digestion. Overall, this was a buy-dominated MOC with clear sector leadership, selective selling pressure, and late-stage rotation — a structure consistent with institutional re-weighting rather than forced flows.

How to read the MIM

ES Levels

The bull/bear line for the ES is at 6893.50. This remains the key pivot for intraday bias.

ES is currently trading around 6897.00, slightly above the bull/bear line, suggesting a cautiously bullish tone as long as price holds above 6893.50. Acceptance above this level keeps upside continuation in play.

The upper intraday range target is 6940.50. Initial resistance sits at 6907.25, followed by 6928.75. A sustained push through these levels opens the path toward the 6940.50 upper range target.

On the downside, support is defined at 6887.00, then 6846.75, which is the lower intraday range target. A failure back below 6893.50 increases the risk of a rotation toward these lower supports. A break of 6846.75 would expose deeper downside toward 6817.50 and potentially 6802.50.

Overall, ES holds a positive intraday posture above 6893.50. Losing the bull/bear line would shift control back to sellers and favor tests of the lower range levels.

NQ Levels

The bull/bear line for the NQ is at 25,677. This is the key pivot for today. Trading below this level keeps the tone defensive and favors sell-the-rally behavior unless reclaimed and held.

NQ is currently trading near 25,578.75, well below the bull/bear line. As long as price remains below 25,677, downside pressure persists with the lower range target at 25,457.25. A clean break below that level opens the door toward 25,383 and then 25,250.50.

On the upside, initial resistance comes in at 25,713.50 and 25,769.50, followed by 25,861.50. The upper range target for the session sits at 25,896.75. Bulls need a sustained move back above 25,677 to shift momentum toward these levels.

Overall, the NQ remains bearish below 25,677. Acceptance back above the bull/bear line would improve odds of a rotation toward 25,769.50 and the upper range target, while continued failure below keeps risk skewed toward the lower range target and deeper support.

Technical Edge

Fair Values for December 12, 2025

SP: 3.35
NQ: 16.09
Dow: 23.75

Daily Breadth Data 📊

For Thursday, December 11, 2025

• NYSE Breadth: 68% Upside Volume
• Nasdaq Breadth: 52% Upside Volume
• Total Breadth: 54% Upside Volume
• NYSE Advance/Decline: 67% Advance
• Nasdaq Advance/Decline: 56% Advance
• Total Advance/Decline: 60% Advance
• NYSE New Highs/New Lows: 239 / 14
• Nasdaq New Highs/New Lows: 370 / 105
• NYSE TRIN: 0.92
• Nasdaq TRIN: 1.16

Weekly Breadth Data 📈

Week Ending Friday, December 5, 2025

• NYSE Breadth: 51% Upside Volume
• Nasdaq Breadth: 54% Upside Volume
• Total Breadth: 52% Upside Volume
• NYSE Advance/Decline: 49% Advance
• Nasdaq Advance/Decline: 52% Advance
• Total Advance/Decline: 51% Advance
• NYSE New Highs/New Lows: 273 / 72
• Nasdaq New Highs/New Lows: 441 / 297
• NYSE TRIN: 0.90
• Nasdaq TRIN: 0.93

Calendars

Economic Calendar Today

This Week’s High Importance

Earnings:

Full Calendars

Trading Room News:

Polaris Trading Group Summary – For Thursday, December 11, 2025

Thursday brought strong trading opportunities to the PTG room, starting with a textbook overnight reversal that retraced the full FED Day range, setting the tone early. Multiple trades, including Open Range Shorts in ES, NQ, and CL, hit full targets. While midday price action turned “brittle,” discipline and patience helped traders stay out of chop. A bull flag breakout in the afternoon provided a final leg higher before a late rejection at the FED Day high. The market closed strong — at the highs of the day — capping off a well-executed session.

Overnight Session – Clean Setup Hits

The overnight session delivered a high-probability BTFD setup as price reversed the entire FED Day range.
Targets at 6818.45 (CD1) and 6820.25 (D-level) were hit, demonstrating the effectiveness of holding overnight context.
PTGDavid emphasized the strength of the reversal: “Fantastic overnight trade… Markets never sleep!”

Pre-Market Planning

Support Buy Zone: 6780–6784 (ES), with entry triggers based on buyer absorption, delta flips, and failed sellers.
Resistance Levels: Noted as potential profit-taking areas, not necessarily short entries.
Key Inflection Point: 6875 highlighted as the “line in the sand,” where price initially found resistance.

Trade Execution Highlights

ES & NQ Open Range Shorts: All profit targets fulfilled early in the session.
CL (Crude Oil) Open Range Short: Full target execution.
Afternoon Bull Flag Breakout: Marked a solid long opportunity before the FED Day high retest.
Closing Push: After a $3.7B MOC buy imbalance was absorbed, price surged to close at the highs of the day.

Lessons & Community Insight

Adapt or Sideline: David called out “brittle” midday price action and chose to sit out — a reminder that discipline often means doing nothing.
Platform Issues Noted: John B shared he missed a key shift due to a platform hiccup, showing the value of stops and backup planning.
Engaged Learning:
- PeterN inquired about overnight D-level trading and stacker conditions.
- John B plans to compile stats on D-level and Money Box setups — demonstrating strong backtesting initiative.
- The room supported each other with questions, answers, and humor, reinforcing the learning culture.

Positive Trade Summary

Overnight BTFD setup to CD1 and D-level: textbook execution
Open Range Shorts (ES/NQ/CL): all met targets — fast, efficient
Bull Flag breakout: clean afternoon long
Closing strength: market absorbed imbalance and rallied into the bell

A solid day of trading for those who followed the plan, recognized changing conditions, and stayed focused.

DTG Room Preview – Friday, December 12, 2025

AI Stock Rotation:
- Oracle (ORCL) down 40% from September peak after earnings miss and concerns over $300B OpenAI reliance.
- Broader concerns over OpenAI’s $1.4T in deals with Oracle, Nvidia (NVDA), CoreWeave, AMD, and Broadcom (AVGO).
- OpenAI CEO Sam Altman called a “code red” amid rising Google (GOOG) competition.
Tech Earnings:
- Google & Nvidia: Shares slid Thursday.
- Broadcom (AVGO): Beat estimates, doubled AI chip revenue, but weak outlook sent shares -4% after hours.
- Lululemon (LULU): +11% on news CEO Calvin McDonald to step down in January; stock underperformed during his tenure.
M&A & Politics:
- Trump intervened in the Warner Bros. Discovery (WBD) sale.
- Netflix (NFLX) was the expected buyer; Paramount Skydance countered with a $108B hostile bid backed by Jared Kushner.
- Trump reportedly demanded CNN’s sale as a condition for deal approval.
- Netflix down 23% ($40B in market cap) since deal talk began; retail investors buying aggressively:
  - NFLX was 3rd most active stock on Interactive Brokers.
  - Buy orders outpaced sells 3:1 on Fidelity.
  - $520M in retail inflows since announcement (Vanda Research).
Macro & Market Setup:
- No major earnings or economic releases today.
- Fed speakers: Paulson (8:00am ET), Hammack (8:30am ET), Goolsbee (10:35am ET).
- Volatility remains moderate post-Fed, ES 5-day ADR: 64.75.
- Whale bias bearish into U.S. session open.
Key ES Levels:
- Support: 6821/24 (channel), 6758/53, 6614/19, 6430/25
- Resistance: 5954/57 (channel), 7287/92, 7430/35
- 50-day MA: 6790.25

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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!!