by Danny Riley

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S&P 500 Climbing The Wall Of Worry

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Our View

There is little positive news emerging from Ukraine, but regardless, the US stock market is on a roll. Personally, I don’t think there is anything new to add that hasn’t been said before. The stats remain bullish as we approach the end of this week and into next week.

A key factor driving this momentum will be the decrease in trading volumes as many people take time off for the Thanksgiving holiday. According to AAA, 79.9 million Americans (23.6% of the population) are expected to travel 50 miles or more for Thanksgiving, an increase of 2.1% from 2023. This would make it the busiest Thanksgiving travel period ever, surpassing pre-pandemic levels. As a result, we can expect a “thin to win” trading environment next week.

Our Lean

Today marks the Week 4 options expiration. While I remain bullish overall, I believe there is still a significant level of headline risk to consider. On November 19, the ES traded down to 5855.00. Following some sideways consolidation over the next three sessions, the ES rallied 130 points up to 5985.00. There is a big line of buy stops above 5993.00 up to 6020.00. Our lean is to buy and 30- 50-point pullbacks.

MiM and Daily Recap

The ES futures sold off to 5905.25 on Globex before rallying to 5971.50 and opening Thursday’s regular session near 5967.75. After the open, the ES initially dipped to 5960.25, followed by a rally to 5969.50 before selling off 50.75 points to 5918.75. By 9:52 AM, the ES rebounded 31.75 points to reach 5950.50, only to drop again by 33.5 points to 5917.25. It then rallied 28 points, hitting 5945.25 by 10:20 AM. After the pop, the ES sold off 38 points to hit a new low at 5907.25 by 10:33 AM.

Over the next hour, the ES climbed 58 points to hit 5965.50 by 11:33 AM and rallied further, gaining 37.75 points to 5982.50 by 1:33 PM. After this high, it pulled back 13.25 points to 5969.25, rebounded to a lower high of 5981.25 by 2:42 PM, and eased back 8.75 points to 5972.50 by 2:45 PM. The session’s high was reached at 3:15 PM when the ES hit 5985.00, marking a gain of 0.73% on the day.

In the late session, the ES dropped 12 points to 5973.00 at 3:42 PM, rallied 6 points to 5978.75, and settled at 5976.75 by 3:50 PM as the cash imbalance showed $750 million to sell. By the 4:00 PM cash close, the ES dropped to 5970.00. Post-close trading saw a further decline to 5966.00 by 4:45 PM, with the ES settling at 5966.50, up 26.75 points or +0.45%.

The NQ settled at 20,793.75, up 5 points or +0.27%, while the day’s leader, the YM, settled at 43,988.00, up 472 points or +1.08%.

In the end, the ES and NQ deflected every negative that was put in front of it, including intermediate-range ballistic missile attacks. In terms of the ES’s overall tone, it was weak on Globex but had a big rally during the day session. In terms of the ES’s overall trade, volume was higher at 1.79 contracts traded.

Bitcoin reached a new intraday high, briefly surpassing $99,000. Crude oil prices rose nearly 2%, while the yield on the 10-year Treasury note increased by 2.5 basis points to 4.43%.

How to read the MIM

Technical Edge

Fair Values for November 22, 2024

SP: 21.15
NQ: 80.12
Dow: 121.57

Daily Breadth Data 📊

NYSE Breadth: 80% Upside Volume
Nasdaq Breadth: 67% Upside Volume
Total Breadth: 69% Upside Volume
NYSE Advance/Decline: 77% Advances
Nasdaq Advance/Decline: 65% Advances
Total Advance/Decline: 69% Advances
NYSE New Highs/New Lows: 242 / 52
Nasdaq New Highs/New Lows: 215 / 163
NYSE TRIN: 0.99
Nasdaq TRIN: 0.95

Weekly Breadth Data 📈

NYSE Breadth: 42% Upside Volume
Nasdaq Breadth: 55% Upside Volume
Total Breadth: 48% Upside Volume
NYSE Advance/Decline: 28% Advances
Nasdaq Advance/Decline: 28% Advances
Total Advance/Decline: 28% Advances
NYSE New Highs/New Lows: 543 / 147
Nasdaq New Highs/New Lows: 817 / 488
NYSE TRIN: 1.34
Nasdaq TRIN: 0.80

Guest Posts:

SpotGamma – Founder’s Notes

What’s Happening in the Market

SPX remained comfortably above its VT all day, but QQQ dipped beneath its VT in a round of market danger, which appears to be caused by waves of geo-macropolitical fear and complacency.

These types of external shocks on the market can upset technical models that depend on continuity, but the good news is that the prices of options are still near the relative bottom of their own price spectrum, meaning that there are still wide ranges of cheap long option strategies available—so as to benefit from a price spike in either direction.

One can never predict the exact timing of an IV spike due to their nature, but we like the odds of continued mean-reverting action in that [positive] gamma glue so long as SPX and QQQ can remain above this most critical risk boundary. Even if you only trade SPY and not QQQ, it would essentially be impossible for QQQ to crash without SPY following it down, and therefore the structure of both is important.

The only materially negative sector today was communications (XLC = 19% META, 11% GOOGL, and 7% NFLX). It was an overall win for market breadth today as the leaders were utilities, industrials, and consumer defensives: SPY +0.54%, QQQ +0.36%, and IWM +1.52%.

The flows were complex today and we had plenty of questions about them, so we will dig in with a reminder that it works very well to begin an analytical process (using SG tools) by starting with S&P Equities as a guide for fluid directional guidance.

The day began with wide volatility which resolved itself once bullish momentum flows became established by about 10:45am EST (where the arrow is in the lower left).

As the price rallied here with bullish influence from both puts and calls, which we identify as an extremely powerful continuation signal nicknamed momentum flows.

By about 1:30pm EST, the slope of call flows began to flatten out but they were still bullish overall. What this marked was a potential call flow breakout opportunity to watch for at about 1.3B call gamma, where the dotted line and crosshairs are focused.

This call flow breakout was realized, but it was short lived and met with exhaustion, which coupled with suddenly even more bearish put flows, therefore making a rally pop at the close very unlikely.

This is just a snippet of daily reports you get from the SpotGamma team. Check out their product using the link below.

Check out SpotGamma’s Products

Trading Room News:

Polaris Trading Group Summary: November 21

The trading day showcased a mix of dynamic movement in the morning session and a more subdued afternoon. Here’s how the day unfolded:

Pre-Market and Opening Session:

Key Updates: PTGDavid shared relevant links, daily strategies, and disclaimers, providing a roadmap for the trading session.
Early Action: Price action began strong, with bullish momentum pushing above the prior high (PH) and achieving the Cycle Day 1 (CD1) penetration zone target around the 5971 handle. The session was guided by the TRIPLE-A concept: Alignment, Assignment, Attack.

Morning Session:

Market Conditions: The morning session, dubbed “Wild Ride Clyde,” was characterized by wide, volatile swings, requiring flexibility and adherence to trade plans.
Trades Highlighted:
- A Crude Oil (CL) short trade hit two targets, followed by a stop trail.
- An NQ (Nasdaq) trade was stopped out for a small loss (-1R).
Key Levels: 5915 was established as the Line in the Sand (LIS), serving as a pivotal support zone with a ±5-point buffer. Buyers consistently responded at this level, maintaining upward momentum.

Afternoon Session:

Consolidation: After the morning’s volatility, the market settled into a tight consolidation in the upper half of the day’s range, near 5970—a dynamic Bull-Bear inflection zone.
Upside Target Achieved: The next upside target of 5987, set earlier, was emphasized and revisited as the day progressed.

End of Day:

Closing Action: Price closed near the 5970 LIS zone, solidifying it as a critical inflection point. The session’s primary objectives were met, including fulfilling the Cycle Day 1 penetration target zone.
Market Imbalance: An MOC (Market on Close) sell imbalance of $950M was noted.

Lessons and Takeaways:

Adherence to Key Levels: The importance of monitoring inflection points like the 5915 LIS and 5970 dynamic zone was reinforced, as they acted as reliable guides for price behavior.
Flexibility in Market Conditions: Traders navigated volatile swings in the morning by staying disciplined, and later adjusted to the calm, tight range in the afternoon.
Utilizing Tools and Concepts: The TRIPLE-A framework (Alignment, Assignment, Attack) provided a structured approach to the day’s trading opportunities.

Overall, it was a productive session with well-defined strategies, actionable insights, and critical levels guiding the room’s decisions. The day underscored the value of adaptability and precision in trading futures.

DTG Room Preview – November 22, 2024

Market Recap and Key Updates:
- Dow Jones rallied 450 points (+1.1%), S&P 500 rose 0.5%, while Nasdaq 100 closed near flat. Nvidia’s strong earnings offset by supply chain challenges buoyed sentiment, while Alphabet dropped sharply due to DOJ actions regarding Chrome.
- Weekly Jobless Claims fell, reducing the probability of a December Fed rate cut to 58.6% (down from 82.5%).
Crypto & Currency Markets:
- Bitcoin surged past $99,000, nearing the $100,000 milestone, fueled by speculation of a more crypto-friendly SEC Chair replacing Gary Gensler in 2025.
- US Dollar is up 2% for November, extending its winning streak to eight weeks, driven by rising geopolitical tensions.
Commodities:
- Gold and Oil Prices are climbing alongside the dollar due to escalating Ukraine-Russia tensions. Russia’s deployment of a new ballistic missile and the US allowing Ukraine access to long-range missiles have amplified concerns.
Volatility:
- Market volatility is rising and remains moderately high.
Technical Levels (ES Futures):
- The ES continues within its intermediate-term uptrend channel.
- Key Support: 50-day MA at 5852, short-term trendline at 5924-27, and additional support at 5837-42.
- Key Resistance: Potential at 6107-12.
Today’s Focus:
- Economic data releases include Flash Manufacturing & Service PMIs (9:45 AM ET) and UoM Consumer Sentiment & Inflation Expectations (10:00 AM ET).
- No major corporate earnings are expected today.
This concise market overview highlights key drivers and technical levels for traders to watch.

ES – Week over Week

Bounce from last week’s major selloff still holding. ES not able to clear last Friday’s candle, watching for a clear rise above 5995 and an attack at 6000. Markets remain in a bullish upside traveling the middle of the BB.

NQ – Week over Week