by Danny Riley

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Market Crossroads: Bulls Face Tariff Risks and Seasonal Volatility

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Our View

I think the bulls need to be on guard for more tariff headlines. The Chinese are not waiting for Trump to take office, and this situation will likely worsen once he’s in the White House. It wasn’t just NVDA that took a hit yesterday, ADM closed 5.6% lower after BofA downgraded the tech company from a “buy” to a “neutral” rating.

I don’t think the rally is over. I still believe the holiday shopping season will give the markets a boost, as will the Santa Claus rally. But as I said, I have seen signs of underlying weakness. Volatility has been low recently, but it’s not going to stay that way.

Our Lean

Last Friday, I pointed out how much the ES had rallied since October to its current highs. The longs have become overall complacent. Nothing goes up forever, and the index markets have run a boatload of sell stops. It’s only natural for the markets to experience a pullback.

While the overall stats remain positive, that doesn’t mean there won’t be bumps. Our lean is to keep an eye on the 10-year note, ADM, and NVDA. My guess is that you can buy into early weakness, though I’m not sure they hold.

MiM and Daily Recap

The ES traded within a tight range during the Sunday night Globex session. This expanded slightly in the early morning hours, showing a pre-market high of 6105.75, which ended up being the day’s high, and a pre-market low of 6088.50, a key level that broke during the morning session.

After opening the morning session at 6096 and making a quick false breakout above, prices sustained a sideways range for the first 30 minutes before yielding to downside pressure in a sell-all-rallies move. This decline lasted about 45 minutes, hitting an intraday low of 6065 at 11:10 AM. Profit-taking ensued for the next 25 minutes, leading to a rebound up to 6078.75, followed by sideways range bound trade for a couple of hours.

Dual expansion of this range was next. First to the downside, printing 6069 at 1:01 PM, followed by a 50-minute rally to an upside expansion of 6083.25. This proved to be another false breakout as sellers returned and kept dumping until the market reached a new session low of 6064 by 2:51 PM.

The final hour was pretty quiet and range-bound again, with a slight drift lower leading into the 3:50 PM MIM. Initially, the MIM showed $4 million to buy but quickly flipped to $3.35 billion to sell on the 3:55 PM update. The market scrambled a little up and down on this info on the cash close printing our low of the day at 6060, which was also the lowest point in the last four days. The ES settled at 6063.25, down 35.75 points or -0.59%. The NQ settled at 21,473.25, down 183.50 points or -0.85%.

It was a much-needed day of profit-taking as the market looks to back-and-fill once again and see if we can set up for a final year-end rally. The markets traded a slightly higher volume totaling 1.277 million contracts in ES and NQ increasing to 509,000 contracts traded.

Nvidia shares were under pressure on Monday after a Chinese regulator said it was investigating the chipmaker over possible violations to the country’s antimonopoly law. That was the ball of wax that shook the NQ. In terms of the ES‘s overall tone, it was weak and closed that way. In terms of the overall trade, the 1.277 million contracts was the highest in weeks.

Technical Edge

Market Levels:

Fair Values for December 10th, 2024
- SP: 8.6
- NQ: 31.55
- Dow: 71.53

Daily Breadth Data 📊
- NYSE Breadth: 52% Upside Volume
- Nasdaq Breadth: 59% Upside Volume
- Total Breadth: 58% Upside Volume
- NYSE Advance/Decline: 45% Advance
- Nasdaq Advance/Decline: 46% Advance
- Total Advance/Decline: 45% Advance
- NYSE New Highs/New Lows: 124 / 17
- Nasdaq New Highs/New Lows: 230 / 70
- NYSE TRIN: 0.70
- Nasdaq TRIN: 0.61
Weekly Breadth Data 📈
- NYSE Breadth: 45% Upside Volume
- Nasdaq Breadth: 60% Upside Volume
- Total Breadth: 55% Upside Volume
- NYSE Advance/Decline: 37% Advance
- Nasdaq Advance/Decline: 46% Advance
- Total Advance/Decline: 43% Advance
- NYSE New Highs/New Lows: 339 / 96
- Nasdaq New Highs/New Lows: 604 / 285
- NYSE TRIN: 0.83
- Nasdaq TRIN: 0.85

Room Summaries

Polaris Trading Group Summary – Monday, December 9, 2024

The day commenced with a quiet and slow-paced market, typical of a Cycle Day 1. Initial targets and setups focused on potential long opportunities in CL and NQ, though early trades saw limited action. The session gradually shifted toward a bearish tone as structural declines emerged and downside targets were consistently achieved.

Key Events and Highlights:

Morning Session:
- Early trades like the CL and NQ Open Range Long setups triggered but faced a challenging, quiet market.
- As the market moved lower, the focus shifted to bearish scenarios. The first target of 6080 was achieved quickly, setting the tone for further downward momentum.
Cycle Day 1 Targets:
- PTGDavid identified and tracked a textbook Cycle Day 1 decline.
- Key levels of 6075.25, 6069, 6065, and others were fulfilled sequentially, reflecting precise adherence to the Taylor Cycle framework.
- Calvin capitalized on these moves with notable short trades, earning praise for effective execution.
Midday to Afternoon:
- Continued bearish momentum was evident, with ATR trailing stops allowing for optimal management of open short positions.
- PTGDavid highlighted the need for bulls to reclaim levels (e.g., 6075) to consider a reversal, but sustained bids remained elusive.
Closing Session:
- A sell imbalance of $1.1 billion reinforced bearish sentiment as the session closed near the day’s lows.
- Final targets in the 6050s were outlined but remained dependent on market conditions into the close.
Key Lessons & Observations:
- Patience in Slow Markets: The initial quiet opening emphasized the importance of waiting for clear directional moves.
- Directional Dominance: PTGDavid stressed that pace is secondary to the structural direction, which dominated the day’s flow.
- Precision in Execution: Target levels were tagged with remarkable accuracy, showcasing the strength of pre-defined trade strategies and adherence to the Taylor Cycle methodology.

The session demonstrated disciplined trade management, sharp market analysis, and adaptability to shifting conditions, making it a constructive day despite the lack of bullish momentum.

Discovery Trading Group Room Preview – December 10, 2024

Market Performance Recap:
- Nvidia (NVDA): Shares fell 2.5% after China initiated an anti-monopoly investigation, underscoring the company’s central role in US-China tech tensions.
- Indices: The Dow Jones dropped 0.5%, with the S&P 500 and Nasdaq 100 both declining by 0.6%.
Consumer Trends:
- Holiday spending is expected to increase for one-third of US consumers, largely due to concerns over potential price hikes from tariffs.
- A significant number of consumers (22%) plan to purchase electronics or home appliances.
- Stockpiling behaviors are evident, with 77% hoarding toilet paper, 76% storing nonperishables, 58% gathering medical supplies, and 54% collecting OTC medications.
Business Trends:
- US companies are preemptively stockpiling goods to mitigate tariff impacts. CEOs warn of potential price hikes, with Dollar Tree considering raising prices and discontinuing some products.
Sector Highlights:
- Semiconductors: Taiwan Semiconductor Manufacturing Co. (TMSC) reported a 34% sales increase in November, driven by AI and data center demand. In contrast, competitors like Samsung Electronics and Intel Corp face challenges securing new clients.
Earnings & Economic Calendar:
- Premarket earnings include Ferguson (FERG).
- Key economic data: Nonfarm Productivity and Unit Labor Costs at 8:30 AM ET.
Market Sentiment & Volatility:
- Volatility has increased slightly following Monday’s selloff but remains relatively subdued compared to November levels.
- No significant trading activity from large traders overnight, indicating neutral sentiment.
Technical Levels for ES (E-Mini S&P 500 Futures):
- The ES sits within a short-term uptrend channel, with room for both bullish and bearish moves ahead of tomorrow’s CPI release.
- Key resistance levels: 6136/39.
- Key support levels: 6011/14, 5878/83.

This mixed landscape suggests a cautious tone with a focus on tomorrow’s CPI data for further direction.

ES – Week over Week

Bulls did not capture and hold 6100, and didn’t even print a trade above it, dropping 32 points from open to close with a trading range of around 36 points. We found the bottom at 6060, closing below our 6086 support line. Today’s downside looks like 6051 and then 6045. The trading range on the day should be around 30 points. A close below 6045 should have the bears emboldened.

NQ – Week over Week

We hit 21436 on the cash lows. From cash open to cash close the NQ lost 129.25 points (-0.6%). As I write we have a strong move to the upside since 5 am, trading at 21,530 as we move to the open.
We expect the trading range to be around 160 points, looking for a high at 21,616 and a low around 21,485,