Stocks and Bonds Soar; Russell Rips More Than 5%

Rate-hikes come off the table

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Our View

There’s an old saying that if you want to know where the stock market is going, then follow the money. Well, Goldman Sachs has a long history of following the money and has the best proprietary models to do so.

There is no doubt that this is part of what MrTopStep calls the Wall Street traders “with the better seats.”

Goldman tracks all the short positions, and then calculate how much they need to buy when everyone is short. Kinda like a big GameStop situation.

“Globally we estimate CTAs are short -$56bn now, and have flipped slightly net long S&P (+$1.6bn). Our flow projections from here still model buying in all global markets in the near-term, with largest flows remaining in SPX. over 1-week: .. flat tape: +$68bn to BUY ($30bn SPX) .. up big: +$96bn to BUY ($29bn SPX) .. down big: +$22bn to BUY ($9bn SPX) over 1-month: .. flat tape: $93bn to BUY ($33bn SPX) .. up big: $203bn to BUY .. down big: -$65bn to SELL. Where they are max short is IWM.”

The max short was clear with the Russell 5.4% rip yesterday.

Our Lean

Traders were already thinking of no further rate hikes, but after yesterday’s CPI number, most have taken the idea off the table completely according to the CME. Let’s face it, the train left the station and has not stopped.

Our Lean: You can sell the early rallies and buy the pullback or just buy the pullbacks. On the ES YTD chart, it looks like 4516, 4521-25 and 4538 are levels to pay attention to.

The PitBull mentioned yesterday was a Lowry’s 9-to-1 up-day and that there could be another up-day in store.

I still think we are going up a lot more, but the basic pattern has been open lower and rally or gap higher, pullback and then rally. Admittedly, that has not been the way it works every day, but it’s been happening a lot.

The ES uses up a lot of the early buying power and sells off 20 points then rallies to new highs. The ES has now rallied more than 400 points off the 4122 low and has been up 10 days out of the last 12 sessions.

For those of you who like HandelStats levels, here they are:

Upside: Trade and hourly close above 4533. targets 1 sd at 4541. Trade and hourly close above there targets 4557.25, then 4564.50, then +2 sd at 4568.59. Hourly close above there targets 4580.50, then +3 sd at 4596.14.
Downside: Trade and hourly close below 4520.75 targets 4:15 settlement at 4513.50. Hourly close below there targets 4493.12, then -1 sd at 4485.95. Hourly close below there targets 4469.88, then -2 sd at 4458.41, Hourly close below there targets -3 sd at 4430.86.

MiM and Daily Recap

ES Recap

The ES made a 4420.00 low and rallied up to 4490.25 on Globex after the October CPI report was lower than expected and the ES opened Tuesday’s regular session at 4486.75.

After the open, the ES made a low at 4483.75 and over the next 90 minutes, it rallied up to 4520.75 at 11:29, up 89 points on the day or 1.98%. At the high, the NQ was up 2.2% and the RTY was up a whopping 5%. After a small pullback, the ES rallied up to 4520.75 and sold off down to 4502.00 at 12:25, rallied up to a lower high at 4514.75, made a 4500.25 double bottom at 2:11, and then a buy program hit that pushed the future straight up to 4524.25 at 3:21 as the early imbalance showed $134 million to sell.

The ES pulled back to the 4515.25 level at 3:49 and traded 4514.50 as the 3:50 cash imbalance showed $1.307 to sell and sold off down to 4507.00 at 3:54 and traded 4510.75 on the 4:00 cash close. The ES settled at 4514.50 on the 5:00 futures close, up 86.50 points or 1.95% on the day. The NQ settled at 15,893.00, up 337 points or up 2.17% on the day, the YM (Dow futures) closed at 34,911.00 up 526 points or 1.53% and the RTY (Russell futures) settled at 1,807.00, up 95.5 points or up 5.85%

In the end, the CPI number was explosively bullish. The yield on the benchmark 10-year note dropped sharply to settle at 4.440%. Nvidia has closed higher 10 sessions in a row and rose 2.1%, closing at an all-time high.

In terms of the ES’s overall tone, it was firm. In terms of the ESs overall trade, volume was high: 417k traded on Globex and 1.367 traded on the day session for a total of 1.784 million contracts traded.

Technical Edge

NYSE Breadth: 90% Upside Volume
Nasdaq Breadth: 78% Upside Volume
Advance/Decline: 92% Advance
- a 90/90 NYSE breadth/Advance-Decline day.
VIX: ~14.25

ES

Levels from HandelStats.com

ES Daily

Upside: Trade and hourly close above 4533. targets 1 sd at 4541. Trade and hourly close above there targets 4557.25, then 4564.50, then +2 sd at 4568.59. Hourly close above there targets 4580.50, then +3 sd at 4596.14.
Downside: Trade and hourly close below 4520.75 targets 4:15 settlement at 4513.50. Hourly close below there targets 4493.12, then -1 sd at 4485.95. Hourly close below there targets 4469.88, then -2 sd at 4458.41, Hourly close below there targets -3 sd at 4430.86.

NQ

NQ Daily

Upside: Trade and hourly close above 15992 targets 16050.40. Hourly close above there targets 1 sd at 16028.71, then 16050.40. Trade and hourly close above there targets +2 sd at 16161.42.
Downside: Trade and hourly close below 15998.50 targets 15921.50, then 15902 and 4:15 settlement at 15896.00. Trade and hourly close below there targets 15873.25, hourly close below there targets -1 sd at 15763.29. Below there 15746.88, hourly close below there targets -2 sd at 15630.58.

Guest Post

PTG / Taylor 3 Day Cycle

Author: David D Dube’ (a.k.a. PTGDavid)

Prior Session was Cycle Day 1 (CD1): Dovish CPI helped propel markets to monthly highs on strong volumes, fulfilling Three-Day Cycle Targets (4502). Prior range was 104 handles on 1.811M contracts exchanged.

…Transition from Cycle Day 1 to Cycle Day 2

This leads us into Cycle Day 2 (CD2): Bulls clearly have the wind on their backs as price continues to probe current swings highs. Normal for CD2 is the some ‘back n fill’ consolidation, with a net bullish lean. We’ll as always remain flexible to what Mr. Market offers for trade opportunities. As such, scenarios to consider for today’s trading.

Bull Scenario: Price sustains a bid above 4515, initially targets 4545 – 4550 zone.

Bear Scenario: Price sustains an offer below 4515, initially targets 4490 – 4485 zone.

PVA High Edge = 4523 PVA Low Edge = 4497 Prior POC = 4515

*****The 3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.

For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:

Link to access full Cycle Spreadsheet > > Cycle Day 2 (CD2)