Last week I wrote, “If the ESH21 can clear the 3618-3620s structural support, it could be in for a tumble.” The newly identified UK Covid strain and the lockdowns on southeast Great Britain which includes London created fear. That fear sent the ESH21 down for a strong test last week’s inside 3618/20s support area during Monday morning’s European session. Price probed 360 before snapping back. Thus, last week’s 3619-3620s support area was not cleared and has now the support area has been expanded.
The newly identified UK Covid strain, a likely fifth coronavirus relief package, 2 Covid vaccines approved for distribution, and the addition of Tesla to the S&P 500 have given traders multiple reasons to rethink their expectations. The net result of the big move Monday is that the ESH21 is back within striking distance of its 3724 all-time high.
It’s a shortened holiday week which generally means volume and volatility dry up as the calendar approaches Christmas Eve. The few days before Christmas are historically bullish but given where the ESH21 sits, upside movement could be muted.
Inside structural support and resistance is adjusted but all other support and resistance remain the same as last week.
Resistance Areas (above):
Support Areas (below):
3596-3620s 3568-3585s 3535-3538s 3499-3510s
In the Tradechat Room
Nice move on the 1.6B sell imbalance led to a quick drop of 4 points which was quickly bought back to form a hammer and extended the up move on the closing candle.
Rising states have remained the same since yesterday, but falling states increased by five. Headed in the right direction. Maine should join the staying the same tomorrow and Hawaii is also starting to do better leaving California, Texas and Florida leading the upside.
Wear your masks! Stay at least 10 feet behind someone wearing a mask! (Particularly in a checkout line) Stay home! Take your Vitamin D!
Chart of The Day
GMTT – chart of the day – Crude – Dec 22, 2020
Crude is technically on a buy signal but needs a close above 49.50 to move higher. Our outlook is that it will be difficult to make a good close above that level. GMTT expect Crude to make another “unexpected” nose dive in the near future. However, for Crude to confirm a sell signal we need to see February Crude close below 46.05
XLE failed to bounce further and elected yesterday its sell stop at 38.45. Short term downside target for XLE is 35.15, then followed by a move towards 24.90.
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(ESH20:CME) GLOBEX Session
(ESH20:CME) Day Session
Opening Print: 3655.75
Total Volume 1.78 M
S&P 500 Futures Recap – Trade Date December 21, 2020
S&P 500 Futures: ES/NQ Stay Red While YM/RTY Close Green
After trading in a 128.00 handle overnight range, the S&P 500 futures opened Monday’s cash session at 3655.75, down 54.75 handles, traded to a 3670.75 early high before selling down to 3625.25 just before 9:30 CT for the regular session low. From there the ES rallied higher through the remainder of the morning, printing 3680.75 just before noon.
The afternoon saw continued bidding as the S&Ps would climb to the 3694.25 RTH high just after 1:30, and from there the index would trail lower to a 3671.75 afternoon low before settling the day at 3684.25, down 22.00 handles or 0.59%.
In terms of price action, it was all about selling the 8:45 high and then buying the 9:30 low, holding into the midafternoon. In terms of volume, the ESH traded a strong 1.78 million.
When the VIX started rising last week it was a signal of things to come, TSLA. Traders have always flocked to the S&P futures because of its wild swings and volatility but this year tech has dominated. Maybe the S&P thought in order to keep up with the Nasdaq they needed to spice things up and TSLA was the answer. While TSLA is officially part of the S&P it’s going to take a few days for 100% of the repositioning to be completed.
Our view, the markets are going to slow as the Christmas holiday nears but that doesn’t mean there won’t be some good ‘rips and dips’. Over many years I have learned if you are going to continue to trade into the end of the year you pick your spots better and trade less. There is no reason to take on excess risk. The markets are open for a half day Thursday and closed Friday.
Our lean, the ES sold off 100 handles on Globex Sunday night to Monday morning and rallied 85 handles as of last night’s 3685 Globex high. That’s a lot of wood to chop in 24 hours. My gut says we see an early pullback and then some type of push higher. I think the bias is for higher prices but only into pullbacks.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
As always, please use protective buy and sell stops when trading futures and options.
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