by Danny Riley

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Santa’s Arrival or Market Rotations: The Holiday Forecast

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Our View

Tonight is Christmas Eve and millions of families will be hunkering down for the holiday.

As they say, the markets never sleep, and if the CME could, they’d likely keep the markets open. One of the crazy things has been all of the rotations. In my 45 years of market experience, I’ve never seen so many rotations, but over the last two to three years, they’ve become a regular part of the daily price action.

Despite a decent day for the ES and NQ, the YM and RTY were on the sell side of the rotation. Stocks like MicroStrategy and Palantir joined the Nasdaq rally, while NVDA led the market, up 5.5%, even with 10-year yields moving higher. However, we won’t return to a real bull market until these rotations stop and I just do not see that happening right now. What I do see is the ES setting up for another push higher. Friday’s low of 5861, followed by Monday’s higher low, is a positive indication.

I’m going to keep shorting unless something big happens, this trend could hold through the end of the week.

Our Lean

Call me crazy, but I see 6060 to 6100 coming. Selling higher opens or selling early rallies and then buying weakness has worked well. I’m looking to buy 20- to 40-point pullbacks. Don’t believe the talk that Santa isn’t coming—he is.

MiM and Daily Recap

On the last full trading day before Christmas, the ES traded largely sideways during the Globex session. There was an initial quick move up to 6026, with an overnight high of 6033 around midnight. However, momentum sagged in the early morning hours, reaching a pre-market low of 5983 at 8:40 a.m.

The regular session opened at 5998.75, making an early high of 6008.25 within the first four minutes. This high was quickly followed by a reversal, with the ES dropping to the session low of 5965 approximately 40 minutes into trading. From there, a recapture of the previous low and pre-market range signaled that the low of the day was in.

The rally from the morning low pushed the ES through the opening price and into a regular session high of 6020.50 just after noon. A subsequent pullback, holding above the opening level, led to a slow and steady move higher over the next two hours, culminating in a false breakout above the Globex high at 6033.50 at 2:14 p.m. This move reversed and brought in some selling, bringing the ES down to 6012 at 3:10 p.m.

Volume picked up during the sell-off, but selling pressure quickly dried up as buyers stepped in ahead of the 3:50 p.m. MiM, which showed $2.7 million to buy. One higher print to 6043 came in as the MiM update increased slightly but was basically absorbed as the ES printed 6036 on the cash close settlement and closed the after-market at the same level. The ES ended the day up 39.50 points (+0.66%), while the NQ closed at 21,737.25, up 184.75 points (+0.86%).

Volume eased back to more normal levels as the ES traded 1.3 million contracts, more than I expected, and the NQ traded 502 thousand. In the end I was off on one thing, last week’s low was not 5588.00 it was 5861.00, either way the ES made a higher low and rallied 65 points. In terms of the ES’s overall tone it acted firm.

Technical Edge

Fair Values for December 24th, 2024
- SP: 63.56
- NQ:256.99
- Dow: 414.13

Daily Breadth Data 📊
- NYSE Breadth: 57% Upside Volume
- Nasdaq Breadth: 64% Upside Volume
- Total Breadth: 63% Upside Volume
- NYSE Advance/Decline: 49% Advance
- Nasdaq Advance/Decline: 45% Advance
- Total Advance/Decline: 46% Advance
- NYSE New Highs/New Lows: 19 / 133
- Nasdaq New Highs/New Lows: 80 / 161
- NYSE TRIN: 0.73
- Nasdaq TRIN: 0.47
Weekly Breadth Data 📈
- NYSE Breadth: 46% Upside Volume
- Nasdaq Breadth: 58% Upside Volume
- Total Breadth: 53% Upside Volume
- NYSE Advance/Decline: 14% Advance
- Nasdaq Advance/Decline: 25% Advance
- Total Advance/Decline: 19% Advance
- NYSE New Highs/New Lows: 124 / 377
- Nasdaq New Highs/New Lows: 379 / 644
- NYSE TRIN: 1.13
- Nasdaq TRIN: 0.91

Room Summaries

Polaris Trading Group Summary – Monday, December 23 2024

The trading day kicked off with a solid strategy framework and immediate fulfillment of key target zones. PTGDavid outlined a bullish scenario to start the day, with the price reaching the 6045-6050 zone, fulfilling expectations perfectly. This was followed by a sell-side lean, as the market successfully hit the lower target zone of 5965-5950, demonstrating strong adherence to the pre-planned strategy.

Key Highlights and Positive Trades:

Morning Trade Execution:
- The 6005 Line in the Sand (LIS) played a pivotal role, guiding traders on price action dynamics.
- Both upper and lower target zones were tagged early in the session, highlighting excellent market rhythm and preparation.
Calvin’s Trade Success:
- Calvin captured 7 points from a bull stacker trade, entering at 5980. PTGDavid commended this excellent execution.
Bullish Momentum in the Afternoon:
- Shifted to a long lean strategy, aligning with the sustained strength above LIS 6005.
- PTGDavid accurately called the market to hold and leverage higher levels, with the bulls remaining dominant through the afternoon.
- The 2 PM “Shake n Bake” marked the beginning of a final upward momentum, fulfilling the CD2 Range Target at 6031.
End-of-Day Rally:
- The closing session showcased a flawless “Dip and Rip” strategy, with buyers stepping back in after a brief pullback.
- A Massive MOC Buy Imbalance of $2.5 Billion further drove the final upward move, ending the day on a high note.

Lessons Learned:

The importance of sticking to a defined trade plan: Both the upper and lower targets were achieved due to precise adherence to the strategy.
Recognizing key levels like LIS and ORR High as anchors for trade execution and management.
Patience during pullbacks proved rewarding, particularly in the afternoon session’s “Dip and Rip.”

Additional Notes:

PTGDavid shared insights into trading psychology with the release of his new e-book.
Engagement from the trading community was strong, with traders sharing their success and holiday well wishes.

The session closed on a positive note, with strategies playing out as planned and a clear demonstration of effective market alignment.

Discovery Trading Group Room Preview – December 24, 2024

Holiday Schedule: Markets are on a shortened session for Christmas Eve, with the NYSE closing at 1 PM ET. Activity is expected to taper off as the holiday season progresses.
Market Recap:
- Monday saw a continuation of bullish momentum, driven by Big Tech.
- Major Indices:
  - Nasdaq 100: +1%
  - S&P 500: +0.7%
  - Dow Jones: +0.2% (recovered from early losses)
- Key Movers: Broadcom (AVGO) +5%, Nvidia (NVDA) +3%, Meta (META), and Tesla (TSLA) posted gains.
Federal Reserve Outlook:
- No rate cut expected in January; March shows a 50% chance.
- Fed remains cautious on inflation heading into 2025.
Corporate News:
- Starbucks (SBUX): Over 5,000 workers across 300+ stores expected to strike over wage and scheduling disputes.
- No significant earnings reports scheduled today.
Market Dynamics:
- Volatility: Elevated on Monday, with the ES 5-day average range at 123 points. Expected to decline during today’s half-day session.
- Whale Activity: Bias is bullish ahead of 8:30 AM ET Durable Goods Orders data.
- Technical Levels (ES):
  - Downtrend persists within a broader uptrend channel.
  - Support Levels: 5898/93, 5848/43.
  - Resistance Levels: 6109/06, 6379/84.
  - 50-day MA (6025.50) could act as support/resistance.
Economic Calendar:
- Richmond Manufacturing Index at 10:00 AM ET.

Expect light trading as markets wind down for the holiday season.

ES – Week over Week

ES has 6035 to 6040 as upside resistance. If the price can climb up over that we would have 6084 in play and then 6121 to the upside.

For the downside we have price breaking down below 6035 which puts a target on 6002 and then 5965. It is a low volume abbreviated day with the cash markets closing at 1pm ET and the Globex closing at 1:15 pm.

NQ – Week over Week

NQ targets 21,779 and then 21,854 upside. Our bullish conversion happens at 22,538 so that will not happen today. On the downside, 21,705 and then 21,566 are in view for the short trading session.