Things Are Heating Up

Monday for the hold.

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Our View

I’m not sure what to say. The YM closed at its highest level since October 11, and the ES made a new all-time contract high on extremely low volume after JPMorgan kicked off the earnings session. At the same time, the Israeli conflict is spreading, with Jordan calling for an arms embargo. It’s absolutely crazy. As I said almost a year ago, the Middle East will be the first war the U.S. gets involved in. The Biden administration is sending an advanced anti-missile system to Israel, along with 100 American troops to operate it. Meanwhile, Turkey’s leader, President Recep Tayyip Erdoğan, is threatening to send NATO troops into Israel to intervene on behalf of the Palestinians.

North Korea has stepped up its threats against South Korea, and it’s being reported that Ukraine has killed several North Koreans in a missile strike in Ukraine, while Putin continues to advance. At the same time, China is threatening the Philippines and Taiwan. Look, I am no Wall Street or military analyst, but if you don’t think this is being orchestrated by China, you’re not paying attention, or you just don’t want to think about it. War is here, it’s already started, and the polarizing effects will continue to change the world we live in.

I said many years ago that the U.S. could no longer be the global sheriff, and that we need to secure our own lands. Now we have Russia and China in the Arctic and flying around Alaska. The globe is a sea of conflicts for you to see (check out this link: Global Conflict Tracker). This is not Y2K, my friends. This is the face of communism, and like it or not, they are pushing their agenda around the world while our weak political system is getting outgunned.

Despite its weak economy, China continues to hand out billions in infrastructure projects to poor countries around the world, and Russia is all over Africa. What are we doing? Nothing. We’ve been behind the curve for so long, it’s hard to imagine that this will get better anytime soon.

The Chinese and Russian state planners have mapped this out, and the U.S. is blindly following. We’re destabilizing ourselves while pushing the U.S. military beyond its limits and trying to replace the dollar. And the elephant in the room? The 11+ million immigrants that the current administration has allowed into the U.S. represent the largest security threat in our history.

Crazy. I mentioned my friend Bubble (a nickname I gave him) a few years back. I thought he was nuts when he told me he sold his stocks and started stacking gold and silver. He also bought some handguns, lots of ammo, and dried food rations. There is no denying that over the last few years, metals have done well, but a lot of that is due to the risk premium.

As of September 2024, the S&P 500 has risen approximately 520-550% from its March 2009 credit crisis lows. The index was around 676 points in March 2009 and has surpassed 5300 points in September 2024. In that same period, gold has increased approximately 100-120%. Back in March 2009, gold was around $900 per ounce, and by September 2024, it has typically traded above $2000.

While the jury is still out for Bubble, the current conclusion is that if he had stayed with his stocks, his gain would be 5x in stocks compared to his gains in gold and silver.

Speaking of bubbles, Nvidia’s stock value has ballooned by an incredible $400 billion in just five days, pushing its market cap to an unbelievable $3.26 trillion. The $400 billion increase surpasses Costco’s entire market cap of $250 billion and $254 billion in revenue from last year. According to Reuters, in 2024 alone, Nvidia’s stock jumped by 170%, and since early 2023, its growth is up 800%. The numbers are nothing short of astonishing. While Costco generated $7.4 billion in net income last year, Nvidia boasted a whopping $30 billion in profit from $61 billion in revenue.

This is what’s been holding the markets up over the last few days!

MiM and Daily Recap

The ES traded down to 5818.00 and rallied up to 5837.50 during the Globex session before opening Friday’s Fed-packed regular session at 5831.00. The ES then traded down to 5823.25, rallied up to 5836.50, pulled back to 5829.00, and rallied again to 5839.75 at 9:56 a.m. It then dropped 5.5 points down to 5834.00 at 10:02, hit a high of 5866.00 at 10:28 a.m., and sold off 14.5 points to 5851.75. After that, it rallied 11.25 points to 5863.00 before dropping 18 points down to 5845.00 at 12:56 p.m.

Following that dip, the ES rallied 19 points to 5864.00 at 2:20 p.m., dropped 11.25 points to 5852.75, and then rallied 15.5 points up to 5868.25 at 3:15 p.m. After that, it pulled back again, trading down to 5861.75 at 3:58 p.m. It traded at 5864.25 when the 3:50 p.m. cash imbalance showed $1.1 billion to sell, then rallied to 5866.00 and started to weaken, eventually trading up to 5869.50 on the 4:00 p.m. cash close. After 4:00 p.m., the ES slowly ticked down to 5852.75 at 4:16 p.m. and traded sideways into the close.

The ES settled at 5853.25, up 24.25 points or +0.42%, the NQ settled at 20,413.25, down 16.5 points or -0.08%, and the YM (Dow future) settled at 43,104.00, up 358 points or +0.84%. The RTY (Russell) settled at 2,247.30, up 42.60 points or +1.93%.

In the end, it was a long, grinding day of slow rips, dips, and rotations. In terms of the ES’s overall tone, it acted fine until late in the day. As for the ES’s overall trade, volume was low—only 957k ES contracts were traded, marking the lowest volume in over three months.

How to read the MIM

Technical Edge

Polaris Trading Group Summary Oct 10th:

On October 10, 2024, the PTG trading room started with the usual morning greetings and updates on key economic indicators. PTGDavid highlighted that Core Producer Price Inflation came in higher than expected, leading to a rise in short-term interest-rate futures as traders adjusted their expectations regarding potential Fed rate cuts.

Throughout the morning session, attention was focused on price action near pivotal levels, with key support and resistance zones identified at 5810-5815 and 5840-5845, respectively. The bulls needed to sustain a bid above 5840 to target the 5855-5860 zone, while the bears aimed to cap the price to prevent further upward movement.

As the day progressed, the market followed a bullish trajectory, confirming the strategies discussed during the morning session. PTGDavid noted the successful achievement of the initial upper target zone, with some resistance observed around the 5860-5865 area. Despite an uptick in responsive selling, the overall tone remained bullish, and traders were encouraged to capitalize on dips.

The trading strategy emphasized adaptability, with frequent reminders to focus on capital preservation as the week neared its close. Overall, the session was marked by effective navigation of market dynamics and adherence to the daily trade strategy, with participants looking ahead to potential opportunities in the afternoon.

DTG Room Preview – October 14, 2024

Good morning! Last week, all three major U.S. stock indices rose by more than 1%, with positive momentum driven by better-than-expected Q3 results for the big banks. This week, eyes are on earnings from Bank of America, Goldman Sachs, and Morgan Stanley, along with key reports from United Airlines and Netflix. Wall Street is expecting nearly a 40% earnings increase from Netflix, but with a 50% stock run-up this year, further appreciation may be challenging.

The Producer Price Index came in hotter than expected, with core PPI increasing by 2.8% versus the forecast of 2.6%. Looking ahead, Thursday’s September Retail Sales report will be critical to the Fed’s rate decision. Analysts expect a 0.2% increase, up from 0.1% in August.

Geopolitical tensions remain high as the Middle East conflict escalates. The market is anticipating Israel’s response to the Oct 1 missile attack, while the U.S. sends advanced missile defense systems to Israel.

Today, the economic calendar is light, with Fed speakers Kashkari at 9:00 a.m. ET and Waller at 3:00 p.m. ET. Volatility ticked down on Friday but remains steady.

Technically, the ES is nearing its short-term uptrend channel resistance at 5883/85, which could cap the first test. If the bulls break through, it’s blue skies ahead, but the bears have room to work from a trendline perspective with potential support at 5741/44 and 5693/98.

Stay nimble and watch for opportunities as the day unfolds!

Economic Calendar

Full 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!