on January 7, 2025

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Navigating the Futures: Sell Late-Day Strength Amid Volatility

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Our View

The markets never move in just one direction. Whether it’s selling a 30-point gap-up open, rallying all day, or selling off late in the session, the ES constantly shifts. There have been times when the ES trades in a 15 to 20-point range and then rallies 30 points in the last few minutes of the day. It all depends on who holds the better seats, and right now, it’s about selling the late-day strength.

As I always say, the ES never does what most people want it to do when they want it to. After the chip stocks rallied last week and on Monday, there was talk about Trump watering down sanctions. This weakened the dollar and posed a potential blow to American exporters.

Our Lean

Today, we have two Fed speakers, the U.S. trade deficit report, ISM data, and job openings on deck. My view is that the ES is trying to go higher, but you can’t fall in love with buying the rallies.

I know I miss a lot of longs when I say to buy the 30 to 50-point pullbacks, but when they happen and I’m right, you get paid handsomely. There is no reason to hurry when you have 60 to 80-point ranges every day.

MiM and Daily Recap

The ES gapped up on the Globex open and initially drifted lower, marking an overnight low of 5980.75 by 9 PM. Following a period of sideways trading, the market began to move higher in the early morning hours, reaching a pre-market high of 6041.75 around 9 AM. Some profit-taking by longs brought prices back down to 6015.75 pre-market and with more buying we opened the regular session at 6032.75, leaving room for a short squeeze.

At the regular session open, the ES made a quick thrust higher before testing the open price. The ES ripped through the overnight high to print 6052.25 by 9:46 AM. The upward momentum continued with a steady pace and a couple of small pullbacks to get all the way to 6068.25 at 11:30 AM which proved to be high of the day. With a couple of lower highs, the sellers took over from about the 5054 level at around noon and accelerated after an hour or so to print a low of 6035.50 at 1:02 PM.

A sideways consolidation for about thirty minutes brought the ES back up to 6045.25 but that was all the buyers had left. The ES continued with some heavier selling back down through the open and stair-stepping down to 6009 by 3 PM. A short-covering for another 30 minutes failed from the 6022 level as the sellers dumped it for a regular session low of 6004 just before the 3:50 PM MiM imbalance release. The imbalance, which began at 980 million to buy and grew to 1.47 billion by 3:55 PM, spurred late-session buying. This lifted the ES to settle at 6020.50 for the cash close, with a slight post-market rally bringing the final exchange close to 6028.25, up 43 points (+0.72%) for the day. The Nasdaq (NQ) performed even more strongly, closing at 21,780.50, up 287.50 points (+1.34%).

In the end, I’m not cheering that I called it right. Once you start patting yourself on the back, you go right back in the shitter.

In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was steady all day, with 1.46 million contracts traded. Bitcoin topped $102,000, while oil prices fell after a five-day winning streak. The yield on the 1-year note rose to 4.616%.

How to read the MIM

Technical Edge

Fair Values for January 7, 2025
- SP: 45.59
- NQ: 186.63
- Dow: 276,77

Daily Breadth Data 📊
- NYSE Breadth: 55% Upside Volume
- Nasdaq Breadth: 69% Upside Volume
- Total Breadth: 67% Upside Volume
- NYSE Advance/Decline: 42% Advances
- Nasdaq Advance/Decline: 51% Advances
- Total Advance/Decline: 47% Advances
- NYSE New Highs/New Lows: 68 / 32
- Nasdaq New Highs/New Lows: 146 / 55
- NYSE TRIN: 0.45
- Nasdaq TRIN: 0.49
Weekly Breadth Data 📈
- NYSE Breadth: 53% Upside Volume
- Nasdaq Breadth: 64% Upside Volume
- Total Breadth: 61% Upside Volume
- NYSE Advance/Decline: 61% Advances
- Nasdaq Advance/Decline: 58% Advances
- Total Advance/Decline: 59% Advances
- NYSE New Highs/New Lows: 77 / 247
- Nasdaq New Highs/New Lows: 236 / 266
- NYSE TRIN: 1.41
- Nasdaq TRIN: 0.79

Guest Post

Stock Traders Almanac

Santa Clause Rally Fails to Call But January Barometer Holds the Key

Santa was a no-show for the second year in a row. But all hope for 2025 is not lost. Defined in the Stock Trader’s Almanac, the Santa Claus Rally (SCR) is the propensity for the S&P 500 to rally the last five trading days of December and the first two of January with an average gain of 1.3% since 1950. This indicator was discovered and first published by Yale Hirsch in the 1973 edition of the Almanac.

The lack of a rally can be a preliminary indicator of tough times to come. This was certainly the case in 2008 and 2000. A 4.0% decline in 2000 foreshadowed the bursting of the tech bubble and a 2.5% loss in 2008 preceded the second worst bear market in history. Down SCRs were followed by flat years in 1994, 2005 and 2015, and a mild bear that ended in February 2016.

Last year, in 2024, New Years jitters did not last throughout January and S&P 500 went on to log a second straight yearly gain in excess of 20%. Of the 16 down SCRs since 1950, 11 years have been up and 5 down, but the average gain is a tepid 6.1%. As Yale Hirsch’s now famous line states, “If Santa Claus should fail to call, bears may come to Broad and Wall.”

With the Santa Claus Rally a no show we will be watching for a positive First Five Days (FFD) and January Barometer (JB), the second and third legs of our January Indicator Trifecta. If these seasonal indicators are negative and the market does not rally as it normally does during this time, we may shift to a less bullish posture – if not outright bearish.

With two more January indicators remaining, we will reserve final judgement until the end of January when the JB result is officially known. As long as the JB is positive the prospects for 2025 remain reasonably good.

Room Summaries

Polaris Trading Group Summary – Monday, January 6, 2025

The first full trading week of the year started strong, with Cycle Day 1 (CD1) targets nearly fulfilled early in the session, reflecting a continuation of the Globex rally. This set the tone for a productive day in the PTG room, led by David Dube (PTGDavid).

Key Highlights:

Morning Session:
- Strong Start: The market began on a bullish note, with price action fulfilling the upper range targets for CD1. The calculated range target of 6042 was achieved, showcasing alignment with historical CD1 averages.
- Process-Oriented Mindset: David emphasized the importance of “focusing on the process,” quoting Samurai Pips, which resonated with the team. This lesson reinforced the idea that sticking to defined strategies yields long-term success.
- New Member Welcome: Calvin and John (“slatitude39”) joined the PTG community, receiving a warm welcome from the group.
Midday Observations:
- Reversion to VWAP: As lunch approached, prices reverted to the session VWAP zone after hitting the morning’s highs. This behavior highlighted the importance of monitoring intraday trends and adapting to changing conditions.
- Trading Insights: A member noted that trades not going in one’s direction are not a reflection of the system’s validity but part of the business. This valuable reminder reinforced the significance of a disciplined mindset.
Afternoon Session:
- Total Reversal: The bullish momentum from the morning reversed in the afternoon, with prices retracing back to key zones like 6018–6020. David pointed out that a break here could trigger further downside and potentially fill the gap.
- Critical Levels: Bulls needed to reclaim 6029 to regain control, but the market struggled to hold key levels.
End of Day:
- The session closed with a Market-On-Close (MOC) buy imbalance, indicating potential bullish interest for the next trading session.

Lessons Learned:

Focus on Process: Eliminating distractions and following defined steps can help traders execute confidently, as emphasized during the session.
Market Dynamics: Reversals, like the one seen today, reinforce the need to stay adaptable and maintain awareness of critical levels and VWAP.
Community Support: The camaraderie and knowledge-sharing within the PTG room continue to provide valuable learning opportunities for new and seasoned members alike.

Overall Performance:

The morning session’s bullish targets were achieved successfully, reflecting precise pre-market analysis and preparation. While the afternoon saw a reversal, key lessons on adaptability and maintaining composure were highlighted, setting a positive tone for the rest of the week.

Discovery Trading Group Room Preview – December 31, 2024

Morning Market Briefing Summary:
- Nvidia (NVDA): Nvidia shares surged 8% over two days, closing at a record high. The rally was fueled by anticipation of CEO Jensen Huang’s keynote at CES, where he introduced AI-focused innovations including the Blackwell-based GB10 superchip and a desktop AI supercomputer called Project DIGITS, priced at $3,000.
- Disney and FuboTV Merger: Disney (DIS) announced plans to merge Hulu+ Live TV with FuboTV (FUBO), taking a 70% stake in the new entity. FuboTV shares skyrocketed 250%, while Disney shares remained steady. FuboTV’s CEO will lead the merged operations.
- Canadian Political Shift: Canadian Prime Minister Justin Trudeau resigned as Liberal Party leader, opening the door for a new PM by March. This move comes amid trade tensions with the Trump administration and internal party conflicts.
- Economic Events Today:
  - Trade Balance (8:30 AM ET)
  - ISM Services PMI and JOLTS Job Openings (10:00 AM ET)
  - Richmond Fed President Thomas Barkin speaks (8:00 AM ET).
- Market Insights:
  - No significant corporate earnings today.
  - Volatility decreased slightly but remains high.
  - Overnight large trader volume was light and mixed.
  - The ES short-term downtrend channel held at Monday’s high (6062/59s).
Stay tuned for further developments as the trading day progresses.

ES – Week over Week

ES for today prints above 6000 remain bullish. The bulls need to show seriousness and push up and over and hold the 6046 level. For them to extend they need some trades above 6068 and then 6082. A break of the 6021 could start some selling extending down to 6000. Below that is 5994 and then 5981.

NQ – Week over Week

Bulls need to push below 21,772 near the open today and then 21,602. If we do sell hard, 21,479 is the price to establish a lower low and 21,436 would be a critical hold for the bulls. Upside prices are 21,827 and then free air to 22,050. Less resistance to the upside than the downside today. The sell after establishing the high yesterday was not very reassuring for the upside.