Rotation, Rotation, Rotation.
Small caps finally fetch a bid.
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Our View
In the new world trading order, the name of the game is rotation.
Three weeks ago the PitBull mentioned buying the “beaten down Russell 2000” and not long after it had its best trading day in a year, rallying more than 5.4%.
The index surged as the risk-on rally extended to small caps and was up another 1.25% on Friday when most of the other indexes were struggling.
40% of the Companies in the Russell 2000 Report Negative Earning, Can You Say Rotation?
The index made a high in late July, then suffered a decline of almost 19%, making its low on October 27th. Since that low, the Russell is up 10% and at last week’s high, was up 12%.
If you are not familiar with rotations, here is a link to read about it.
To conclude, the jump in the Russell is a big example of a year-end rotation — buying the beaten-down stocks and lightening up on the ES and NQ rally.
Our Lean
I get spooked when someone who has been trading great asks, “the ES could be down 1.5% on Monday?” That hot trader is our very own @therealtraderdave.
Last week Dave called a trade, fully live in our chat room. He paid .60 cents for the trade and sold at $18.00. That said, Dave thinks a big chunk of the CTAs will pause soon, but others will step in their void into year-end.
TraderDave — or “TD” — also noted that there are “only 28 trading days left to do a whole lot of buying. That’s why it’s impossible to get too bearish until 2024 — Too many must buy.”
It’s hard to overlook what TraderDave has to say, but Friday’s volume was the lowest in weeks, if not months, and was the lowest volume day of the week. Lastly, it feels like people are already taking time off for the Thanksgiving Holiday. I think its fair to say you can sell the rallies, but I also think you buy the back-and-fill pullbacks, 15 to 25 lower should be a decent buy.
For those of you who like HandelStats levels, here they are:
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Upside: Trade and hourly close above 4533.75 targets 1 sd at 4551.40. Hourly close above there targets 4556.74 and 4557.25. Hourly close above there targets 4564.50. Hourly close above there targets 2 at sd.
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DAILY LOSE ABOVE 4557.25 and it is going to 4698.99.
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Downside: Trade and hourly close below 4522.75 targets 4520.50, then 4516.62. Hourly close below there targets 4510.75. Hourly close below there targets -1 sd at 4499.10. Hourly close below there targets 4494.05, hourly close below there targets 4480.73. Hourly close below there targets -2 sd at 4472.95.
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DAILY CLOSE BELOW 4480.73 and it’s going to 4460.73.
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MiM and Daily Recap
ES recap
The ES traded up to 4539.50 at 8:15 and opened at 4522.25 at 9:30. From 9:46 to 11:25 (with the exception of trading down to a new low at 4512.55), the ES back-and-filled under the VWAP in a 5 to 8 point range until the ES traded up to 4526.75. The ES traded up to 4534.00 at 2:00, pulled back to the 4526.25 level, rallied up to a new high by 2 ticks at 3:29, and then dropped down to 4514.25 at 3:43.
The ES traded 4522.75 as the 3:50 imbalance showed $835 million to buy and traded 4528.50 on the 4:00 cash close and settled at 4523.75, up 4.25 points or 0.09%. The NQ (Nasdaq futures) settled at 15,874.25, down 23.25 points or 0.15%.
In the end, it was a slow day. In terms of the ES’s overall tone, unchanged isn’t so bad after a 400+ point rally. In terms of the ES’s overall trade, volume was low: 260k traded on Globex and 1.010 million traded on the day session for a total of 1.267 million.
Technical Edge
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NYSE Breadth: 72% Upside Volume
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Nasdaq Breadth: 75% Upside Volume
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Advance/Decline: 70% Advance
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a 90/90 NYSE breadth/Advance-Decline on Tuesday
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VIX: ~14
ES
Levels from HandelStats.com
ES Daily
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Upside: Trade and hourly close above 4533.75 targets 1 sd at 4551.40. Hourly close above there targets 4556.74 and 4557.25. Hourly close above there targets 4564.50. Hourly close above there targets 2 at sd.
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DAILY LOSE ABOVE 4557.25 and it is going to 4698.99.
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Downside: Trade and hourly close below 4522.75 targets 4520.50, then 4516.62. Hourly close below there targets 4510.75. Hourly close below there targets -1 sd at 4499.10. Hourly close below there targets 4494.05, hourly close below there targets 4480.73. Hourly close below there targets -2 sd at 4472.95.
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DAILY CLOSE BELOW 4480.73 and it’s going to 4460.73.
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NQ
NQ Daily
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Upside: Hourly close above 15902.40 targets 15988.50 and 15992. Hourly close above there targets1 sd at 16015.88. Hourly close above there targets 16050.40. Hourly close above there targets 2 sd at 16146.25.
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DAILY CLOSE ABOVE 16050.40 targets 16608.35. More in review.
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Downside: Hourly close 15863.38 targets 15834. Hourly close below there targets -1 sd at 15755.12. Hourly close below 15746.88 targets 15726.33, then 15701.25. Hourly close below there targets 15636.46, then -2 sd at 15624.75.
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DAILY CLOSE BELOW 15636.46 and it’s going to 15498.21.
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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!
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