It’s a busy week.  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Inflation Report on Tap. Then The Fed.

It’s a busy week.

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Our View

We’ve got a full slate this week, starting with this morning’s CPI report. Tomorrow we get the Fed and Powell’s afternoon press conference, retail sales are on Thursday and the December triple-witching expiration is on Friday. Other noteworthy events include the PPI report and bond auctions. 

According to Goldman Sachs its the BUYBACK BLACKOUT: 

“We are in the first week of the estimated buyback blackout period. We estimate this blackout period will run through 1/19/24. As a reminder, we estimate companies enter blackout ~4-6 weeks prior to earnings. We currently estimate ~15% of the S&P 500 is in the blackout window with ~30% in blackout by the end of the week. During the blackout period, our corp desk’s executions typically decline by ~30%. On the authorization front, 2023 YTD authorizations stand at $998B, the third most active year YTD.”

Now, I don’t know if the buyback/blackout period had much to do with yesterday’s slower trade, but when you throw that in with all the other events this week, it makes sense. 

What I think is, “the ES is up too much to buy, but is too firm to sell.” 

With the positive shift in some of the economic reports, the ES and NQ are expecting more of the same: Better numbers and higher prices. That said, while I’m bullish, the ES has been up 6 weeks in a row. We know the ES can’t keep going up without pullbacks. In fact, the small pullbacks and back-and-fill have been the hallmarks of the rally.

Our Lean

Today we will get a look at the Consumer Price Index (CPI), while tomorrow is the Producer Price Index (PPI) and the FOMC release from the Fed.  

As much as I think the ES goes higher in the intermediate term, I also think the ES is getting stretched out — up more than 500 points during the 6-week rally.

Our Lean: If the ES gaps higher, I’m a seller on the open and buying the 20 to 30-point pullbacks. The 3-day average trading range for the ES is 29.42 points, the 5-day range is 32.20 points, the 7-day range is 33.21 points and the 10-day range is 33.67 points. 

Previously, I said ES 4750 by year-end, but if volume drops like yesterday and “thin to win” takes over, it could go even higher. 

Last thing. There’s an abundance of sell-stops building above the current range and just below support. As we all know, no stops go untouched in the S&P 500 futures — especially if volatility picks up. 

For those of you who like HandelStats levels, here they are: 

  • Upside: Trade and hourly close above 4683.50 targets 4698.99 then 1sd 4702.67. Trade and hourly close above there targets 4714.75, and weekly 1sd level 4715.40. Trade and hourly close above there targets4721 then 2sd 4728.60.

  • Downside: Trade and hourly close below 4683.50 targets 4681.62 then 4679.75 then settlement 4676.75. Trade and hourly close below there targets 4668.38 hourly close below there targets 4656.75 then -1sd 4650.25. Trade and hourly close below there targets 4634 then -2sd 4624.90. Note a Daily close below 4668.38 takes some of the momentum out of this rally.

MiM and Daily Recap

ES Recap

The ESH traded up to 4666.50 on Globex and opened Monday’s regular session at 4655.75. After the open, ES traded down to 4653.00 at 9:33 and for the next hour and thirty-three minutes, slowly ground its way up to 4669.50 at 10:59. After the high, the ES slowly pulled back to a 4656.50 double-bottom at 11:37 and then traded up to a new high at 4674.25 at 1:45. That’s when I put this out in the MrTopStep chat:  

  • IMPRO: Dboy :(1:39:45 PM) : es 75s are always tricky

The ES made a 4676.25 double top at 2:37, pulled back to the 4670.75 level at 3:06, and then back-and-filled in a 4 to 6-point range until the cash close. The ES traded 4676.00 as the 3:50 NYSE stock imbalance showed $1.9 billion to sell, traded 4677.50 on the 4:00 cash close, and made a new high at 4679.00. After 4:00, the ES traded in a choppy and narrow range and settled at 4677.00 on the 5:00 futures close, up 16.75 points or +0.36% on the day. 

In the end, it was dead, with very little trade or volume. In terms of the ES’s overall tone, the lower volumes favored the upside — “thin to win.” In terms of the ES’s overall trade, Friday’s low volume carried into yesterday’s trade: Only 172k traded on Globex and 885k traded on the day session for a total of 1.057 million contracts traded. 

Note the recent momentum and end-of-day MIM totals, as totals start to come in on the “net sellers” side of things.

Technical Edge

  • NYSE Breadth: 52% Upside Volume 

  • Nasdaq Breadth: 37% Upside Volume 

  • Advance/Decline: 50% Advance 

  • VIX: ~12.75 

ES 

Levels from HandelStats.com

ES Daily

  • Upside: Trade and hourly close above 4683.50 targets 4698.99 then 1sd 4702.67. Trade and hourly close above there targets 4714.75, and weekly 1sd level 4715.40. Trade and hourly close above there targets4721 then 2sd 4728.60.

  • Downside: Trade and hourly close below 4683.50 targets 4681.62 then 4679.75 then settlement 4676.75. Trade and hourly close below there targets 4668.38 hourly close below there targets 4656.75 then -1sd 4650.25. Trade and hourly close below there targets 4634 then -2sd 4624.90. Note a Daily close below 4668.38 takes some of the momentum out of this rally.

NQ 

NQ Daily

  • Upside: Trade and hourly close above 16492 targets 1sd 16597.69. Above there 16608.35, *** Daily close above there projects much higher, will discuss levels and probabilities. Above 16608.35 targets  weekly 1 sd level 16624.71. Trade and hourly close above there targets 2 sd 16742.88.

  • Downside: Trade and hourly close 16492 targets 16480.62 then 16469.25 then settlement 16452.50. Trade and hourly close below there targets 16366.12 hourly close below there targets -1 sd 16307.31. ** Daily close below 16366.12 takes some of the steam out of this rally. Hourly close below 16307.31 targets 16289.75 then 16276.80 then 16263. Hourly close below there targets 16197.then – 2 sd 16162.12

 

Economic Calendar

 
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!
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