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Market in the Ring: Navigating the Choppy Fight as Election and Rate News Loom
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Our View
I’m so tired of hearing about this election, but the question is whether the stock market will take a hit. I don’t know for sure; the ES had a hard fall, a big bounce late on Wednesday, rallied on Globex, and continued into Thursday’s session. What does all that add up to? A five-hour sell-off, that’s what. Right now, the ES is going in circles. If the NQ moves up, the ES will follow, and the same goes if the NQ drops, but the trend doesn’t seem to hold. Going into the election, I think ‘less is better.’ One thing’s certain: markets will be lively on the evening of November 5th!
Our Lean
I don’t think the charts look bad, but low volume increases the probability of an algo-driven drop. The current price action feels skittish, as though the market is waiting for the next headline. Our lean is that, with week 4 options expiration, if futures are down early, we could see an upward morning followed by a pullback and another rally. However, I’m not sure about the persistent selling that tends to occur later in the day.
MrTopStep Levels:
MiM and Daily Recap
Take the long way home. Open to close about the same after a .6% pullback.
The ES sold off down to 5822.50 on Globex, rallied up to 5870.00, and opened Thursday’s regular session at 5849.00. After the open, the ES traded 5850.50, then sold off to 5842.75 at 9:48, rallied 13.75 points up to 5856.50, and subsequently dropped 17 points at 11:08. It then rallied 11.5 points to reach 5851.00 at 11:20, only to be hit by a large sell program that pushed it down to the day’s low of 5822.50 at 12:16.
After hitting the low, the ES rallied 30.50 points to 5853.00 at 1:48, then dropped 15.25 points to 5837.75 at 2:04. Another rally took it up to 5850.75 at 2:24, followed by an 11-point decline to 5839.75 at 3:08. It rallied 16.5 points to 5856.25 at 3:37 before selling off again to 5845.75. It then traded 5851.00 as the 3:50 cash imbalance showed $1.36 billion to sell and moved to 5849.25 on the 4:00 cash close. After 4:00, the ES traded up to 5856.75 at 4:15, sold off to 5850.25, and settled at 5852.75, up 10.75 points or +0.18%. The NQ settled at 20,391.00, up 116.50 points or +0.57% on the day.
In the end, the ES and NQ managed to regain a small part of Wednesday’s losses. The ES, however, underperformed compared to the NQ. Overall trading volume was low, with 1.118 million contracts traded.
Technical Edge
Fair Values for Oct-25-2024 are as follows, SP: 37.66 NQ: 145.92 Dow: 220.55
Daily Market Recap 📊
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NYSE Breadth: 53% Upside Volume
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Nasdaq Breadth: 60% Upside Volume
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Total Breadth: 57% Upside Volume
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NYSE Advance/Decline: 53% Advance
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Nasdaq Advance/Decline: 52% Advance
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Total Advance/Decline: 53% Advance
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NYSE New Highs/New Lows: 101 / 34
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Nasdaq New Highs/New Lows: 103 / 114
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NYSE TRIN: 1.02
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Nasdaq TRIN: 0.72
VIX: 18.8 (dwn)
Weekly Breadth Data 📈
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NYSE Breadth: 56% Upside Volume
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Nasdaq Breadth: 64% Upside Volume
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Total Breadth: 60% Upside Volume
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NYSE Advance/Decline: 62% Advance
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Nasdaq Advance/Decline: 64% Advance
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Total Advance/Decline: 63% Advance
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NYSE New Highs/New Lows: 560 / 48
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Nasdaq New Highs/New Lows: 656 / 239
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NYSE TRIN: 0.92
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Nasdaq TRIN: 0.72
Guest Post:
SpotGamma – Founder’s Note from Oct 25.
Volatility has been erratic lately, likely due to macro factors like the upcoming November 5 election and the November 7 interest rate announcement. For traders, the key question is often, “How can we profit from this?”
Today, volatility futures made a full loop, indicating relatively low “volatility of volatility” since the VVIX isn’t exceptionally high. However, this movement creates opportunities for “catch and release” trades, such as with SVIX (inverse VX), UVIX (direct VX), or VX futures themselves.
<chart of VX futures – via IB’s Trader Workstation>
Overall, volatility futures (VX) offer the most precise measure and forecast of future volatility compared to the VIX, which is a more passive, limited model. Many may find trading volatility futures to be a simpler approach than trading the index directly through SPY or QQQ.
Jeff Hersch – @AlmanacTrader
Octoberphobia Strikes Again! But “Worst Months” Still Show Strength
October is living up to its reputation with a late-month selloff, aligning perfectly with the typical seasonal trough (see Monday’s post for more details). Despite the dip, even at today’s lows, the S&P 500 was only down 2% from its October 18 high, and the Dow Jones Industrial Average (DJIA) remains up 12% for the “Worst Six Months” (May–October), commonly known as the “Sell in May” period. This places 2023 in the top 15 for the Worst Six Months since 1950, a historically strong indicator for a solid “Best Six Months” (November–April) ahead.
While some Best Six Months (BSM) in similar years have been weaker, the average gain is a healthy 13.2%, with no losses. Our newsletter features updated stock and ETF picks in the recommended portfolios. Check out the full list at Stock Trader’s Almanac. In other words, “Buy in October and get your portfolio sober!”
PTG Trading Room Summary for October 24, 2024
The trading session on Cycle Day 2 saw a mix of calculated patience and strategic reactions to market rhythms. The day opened with a focus on the 5850 “Line in the Sand” (LIS) level, set as a key marker by PTGDavid. Early expectations were aligned with Daily Trade Strategy (DTS) for rhythm-based movement, targeting the 5865-5870 zone if prices held above 5850.
Initial trades saw some success with the CL open long reaching Target 1, though it ultimately resulted in a scratch. As the morning progressed, the market presented choppy, “trappy” conditions, with false breakouts around the opening range, cautioning traders to avoid being early and instead await clearer setups. By late morning, a decisive breakout from the opening range provided more reliable directional movement.
In the afternoon, the market responded to buy interest near 5825, rebounding back to the LIS and continuing in line with the MATD rhythms anticipated. PTGDavid advised patience as the market held within a defined “sandbox” of 5840-5850, with long probes near 5840 and short probes near 5850, calling for nimble positioning.
Toward the close, bulls attempted to push past the opening range, but a substantial sell imbalance of $1.2B at market close held prices within range, closing the day with near-perfect Cycle Day 2 rhythms as forecasted. This session emphasized patience amid trappy conditions and strategic re-entry on clearer signals, illustrating a textbook approach to Cycle Day 2 trading within PTG’s rhythm-based framework.
DTG Room Preview for October 25, 2024
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US Economic Update: October’s flash PMI indicates sustained economic momentum, with GDP growth projected at an annualized 2.5%. Lower selling price inflation is noted for both goods and services, the lowest since May 2020. Despite positive data, investors largely expect a 25-basis point rate cut in November, with a 97% probability according to FedWatch.
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Key Stock Movements:
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Tesla (TSLA): Surged over 20% on record quarterly profits and a strong 2025 EV sales growth forecast, lifting the S&P 500 and Nasdaq.
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Mercedes-Benz (MBG.DE, MBGAF): Reported a 64% drop in core car division earnings due to weak Chinese demand and costs from model revamps, driving shares down 4%.
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Capital One (COF): Shares up 3.7% post strong credit card and auto lending earnings, with potential acquisition interest in Discover Financial Services.
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Economic Events & Earnings: Durable Goods Orders at 8:30 am ET, and UoM Consumer Sentiment and Inflation Expectations at 10:00 am ET. Notable earnings releases include AON, AVTR, and VALE.
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Market Sentiment: Volatility remains moderate. Whale bias shows a short position into Durable Goods data. The ES (E-mini S&P 500) is positioned mid-channel, offering flexibility for both bulls and bears with potential resistance at 5944/47 and support at 5761/64 and 5735/40.
ES – Week over Week
Last week we were dealing with OPEX
The railroad candles from two Mondays and Tuesdays ago created a clear trading range, setting the “ring” for bulls and bears to battle it out. We saw a temporary breakdown below this range last Wednesday, hinting at weakness, but the market has since bounced back into that range. Neither side is showing strong conviction or momentum, leaving us in a choppy, indecisive state.
Without a clear catalyst, expect more back-and-forth action within this range. A solid breakout above or below could set the next trend, but for now, it’s a day-by-day fight in the ring.
NQ – Week over Week
Nasdaq continues to not make that higher high
Last Week
Same comment as above for the ES. Stall or crawl, we are not going anywhere fast.
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!
This post goes out as an email to our subscribers every day and is posted for free here around 2 PM ET. To get your real-time copy, sign up for the free or premium version here: Opening Print Subscribe.
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