The S&P futures (ESH20:CME) ‘again’ traded in a narrow Globex trading range overnight, the range was 3192.00 to 3200.50 with 126,000 contracts traded (low). The ES traded 3200.25 on Wednesdays at 8:30 CT futures open, traded up to 3202.00 at 8:48 and sold off down 3197.25 and then rallied up a lower low at 3199.50. The ES then made two separate higher lows at 3196.50 and 3195.50 just after 9:00 am. After the low, the ES rallied up to a ‘double top’ at 3199.00, pulled back a little then traded up to 3201.00. The next move was back down to 3198.50, two ticks above the vwap, and then rallied 3.5 handles up to the early high at 3202.00. After trading up to the high the ES pulled back down under the vwap to 3197.75 around 11:30 CT. The ES then rallied up and printed 3201.25 five separate times going into 2:00
At 2:30 the ES traded 3200.00 as the MiM started showing $800 million to sell. At 2:45 the ES traded 3 as the final cash imbalance showed million to sell, traded 3196.75 on the 3:00 cash close as the MiM flipped to $286 million to sell, settled at 3199.50 on the 3:15 futures close, up 6 handles or +0.19% on the day.
In terms of the overall tone, the ES acted firm but the total trading range was only 7.5 handles. In terms of the day’s overall trade, total volume was 1.3 million but with 217,000 contracts coming from Globex and 260,000 ESZ/H spreads, meaning only 823,000 ES traded during the day session. I understand we are heading into the Christmas holiday but this is extremely low.
Economic Calendar
Closing Prices
Our View
Hedge Funds And Prop Trading Firm Low Risk At Year-End
Many of the big hedge funds and the proprietary trading firms started cutting back on their trading and market-making right after Thanksgiving and based on the recent drop in volume and narrow trading ranges it is very clear to see. That said, it is that time of the year that the well-known market timers and Wall Street bank analysts start making their forecast for the next year and from the looks of it many are predicting much smaller gains. From 1928 to 2018, the average total return for the S&P 500 in the year after a 25% or greater gain is +9.4%. On the plus side, the odds of a large loss of 10% or greater in 2020 are low based on historical data.
My 2019 year-end call for the S&P 500 futures was ES 3200.00. While I have to admit it seemed like a far fetched call I think three things helped accommodate the call. The first was the lack of return in the interest rate markets. The second part was where can investors park their money? In Europe or Asia? No. And the final part was when the fed backed away from lowering rates and adding QE4. Let’s face it, despite all the naysayers the U.S. economy is still producing a record amount of jobs and inflation remains low. All of this makes for a very bullish stock market scenario. Do I think the S&P will gain 26% next year? No! Do I think there will be a crash? No! Do I think there will be some decent pullback? Yes, I do, but I do not see a major market correction.
Our view: I still get this gut feeling we see a pullback but with volume so low there will need to be some type of catalyst. I do not think it makes much sense to make a big view because there is so little to talk about. Our lean is to sell the early rallies and buy the dips as the ES is in the middle of a big back and fill pattern with buy stops starting to build up above 3204.70 up to 3412.00.
In the Tradechat Rooms
The MiM
Our MiM had a nice selling building up into the reveal at 3:50 pm ET when the first published imbalance turned out to be 384 million to sell. Most of the last-minute surprises came in on the buy side, so buyers are still buying, but holding their cards close to the vest.
HFT Alert
Another narrowish range day, it is more like July markets than Santa Rally markets. Until volume comes in, the drift remains up.
ES–Zones
Today’s dual-path projection:
SPX drifted lower during the European session. For the US open we expect that a likely push up will be blocked at or below 3,215.4 for 3,144.3-8.9 before pushing up towards 3,290. However, if the bounce gets blocked below or at 3,179.8 then there will be scope for a deeper pullback down to 3,134.5-9.2 before pushing up. Finally, an immediate push down that holds at or above 3,179.8-84.8 will most likely open 3,290 sooner than later.
Notice: For ES Mar 20 contract add 3.0 points to the aforementioned SPX prices SPX cash gap at 3,194.10 Range: 3,148.9-None Status: Bullish Strategy: Buying dips Notice: Prices are FXCM SPX500 CFD
Video about ESZones: https://www.youtube.com/watch?v=vTye60dW-ZI
Video of the Day
Market Vitals Technical Analysis
As always, please use protective buy and sell stops when trading futures and options.
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