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Two-Way Flow: Why Both Bulls and Bears Are on Edge
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Our View
You know what’s going on? The Fed is out of bullets, and the markets are reading right into it. Going into the final two trading days of 2024, buyers can’t complain about the year’s returns. The NQ has led the pack, up more than 30%, the ES has risen over 25%, and the YM is up 14%. I think the real problem is the jump in Treasury yields. After Powell’s recent remarks, the 30-year mortgage rate briefly spiked to 7.5%, and the 10-year yield jumped more than 4 basis points to 4.627%. It’s going to be hard to have any kind of sustained rally with that going on.
The end of the year week only has a few economic reports, and the markets will be closed for New Year’s Day on Wednesday, January 1, 2025. CME Holiday Trading Hours
Our Lean
Every bull is concerned and every bear is overly short. I can’t rule out some type of year-end buying or short covering, in other words, there could be a bit of two-way flow. 2025 is going to be a tough year and don’t forget the debt ceiling.
MiM and Daily Recap
The ES made an early Globex high of 6095.25, which held as the high for both the Globex and regular trading sessions on Friday. Selling began in earnest around 8:00 AM from 6075, leading to a new low, pulled back slightly, and then sold off again pre-market, with the ES printing 6051.25 just before the open. The regular session started with a quick push lower and a brief test of the open price at 6052.50 about 15 minutes in. After that, the ES succumbed to heavy selling pressure, dropping steadily to 6003.75 by 10:15 AM.
A brief 10-minute pullback gained about 18 points, forming resistance at 6021.75. This zone failed to hold, leading to another new low of 5997.75 at approximately 10:30 AM. The next hour saw the ES trapped in a whipsawing 24-point range. By the second re-test and failure at the top of this range, sellers regained control, driving prices down to 5983.50 at 12:18 PM. With some profit-taking at this level, a base started to form as we made a false breakdown lower, printing the low of the day at 5982.75, followed shortly by a higher low. This higher low signaled opened the door to some buying.
Over the next two hours, the ES rallied consistently off the low, climbing through stops and printing 6033.75 by 2:54 PM. At this point, the sellers came back in pushing the market back to 6003 just before the 3:50 PM MIM. The MIM showed $3.2 billion to buy, and jammed the shorts right back up to the 6031 range. At 3:55 PM, the MIM flipped to -$1.6 billion to sell, causing some whipsaw action around the cash close. Ultimately, the ES settled at 6027 and closed in the after-market at 6029.25, down 62.25 points (-1.02%) on the day. The NQ closed at 21,719.75, down 264.50 points (-1.2%). Volume was heavier, with the ES trading 1.54 million contracts and the NQ trading 555,000 contracts. This is high for a Christmas holiday period.
Friday’s session served as a warning shot across the bow, signaling that the market will likely show increased selling pressure and sensitivity if bond yields continue to rise. However, in the Bulls’ defense, the day could have been a lot worse. Regardless, the stage is set for more volatility and larger daily ranges as fund managers adjust their portfolios heading into the new year.
In the end, the markets took a lickin’ but kept on tickin’. I’ve tried to explain that it’s not the charts that talk to me, it’s the price action. That action has been pointing to liquidation for weeks, and I don’t believe it’s driven by dumb money either.
Technical Edge
Fair Values for December 30, 2024:
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SP: 50.84
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NQ: 207.35
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Dow: 316.33
Daily Breadth Data 📊
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NYSE Breadth: 18% Upside Volume
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Nasdaq Breadth: 51% Upside Volume
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Total Breadth: 50% Upside Volume
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NYSE Advance/Decline: 18% Advance
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Nasdaq Advance/Decline: 26% Advance
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Total Advance/Decline: 23% Advance
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NYSE New Highs/New Lows: 24 / 121
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Nasdaq New Highs/New Lows: 94 / 91
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NYSE TRIN: 0.78
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Nasdaq TRIN: 0.34
Weekly Breadth Data 📈
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NYSE Breadth: 54% Upside Volume
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Nasdaq Breadth: 65% Upside Volume
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Total Breadth: 63% Upside Volume
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NYSE Advance/Decline: 49% Advance
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Nasdaq Advance/Decline: 55% Advance
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Total Advance/Decline: 52% Advance
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NYSE New Highs/New Lows: 73 / 236
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Nasdaq New Highs/New Lows: 205 / 302
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NYSE TRIN: 0.83
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Nasdaq TRIN: 0.51
Room Summaries:
Polaris Trading Group Summary Friday, December 27, 2024
Key Highlights:
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Pre-Market Bearish Momentum:
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Early morning updates confirmed bearish scenarios for multiple instruments:
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The ES fulfilled its 6070 target, with a continued bearish bias below 6090.
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The NQ achieved its lower target zone (21892–21862), as predicted in the DTS Briefing.
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Morning Session Developments:
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Price action tested significant levels:
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The 12/24 session low at 6042 saw a Buy Response develop, with a sandbox identified between 6042–6055.
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Insights into potential low zones for CD2 were provided, including 6020.75–6025.25, highlighting proactive preparation for intraday shifts.
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Key Trades & Structural Shifts:
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A critical CD2 Statistical lower target at 5998 was tested and held firm, leading to a Bull A4 structural shift. This created the first PB Long opportunity, an important addition to participants’ playbooks.
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The 5998–6000 retest secured a solid Buy Response, signaling opportunities for long plays on dips.
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Strategic Lessons:
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The DTS Briefing provided accurate levels and actionable insights, described as being “en fuego” for the year.
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Clear guidance on staying short-focused until structural shifts signaled bull opportunities, demonstrating the importance of adapting to market conditions.
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The 3-Day Cycle analysis offered a deeper understanding of patterns leading to predictive accuracy.
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End-of-Year Context:
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The market displayed a consistent risk-off long-liquidation trend, typical of year-end trading.
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David emphasized the importance of playing defensively and leveraging structural shifts rather than forcing trades.
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Additional Notes:
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David confirmed that he will be on a break starting noon and will return for full sessions on Monday and Tuesday next week.
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The room expressed camaraderie, with participants exchanging well-wishes for the weekend and plans for the new year.
Positive Takeaways:
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Accurate fulfillment of pre-identified target levels highlighted the strength of pre-market analysis.
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The PB Long opportunity at 5998 added a valuable example for members to integrate into their trading strategies.
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Emphasis on structural awareness reinforced disciplined trading practices.
Final Remarks: The session was marked by excellent preparation and execution, with clear communication and actionable insights from PTGDavid. The room ended on a positive and supportive note, looking forward to a refreshed start in the new year.
Positive Takeaways:
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Accurate Analysis: PTGDavid’s ability to predict market movements and provide actionable levels was a standout feature.
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Emphasis on Education: The room benefited from clear explanations and uploaded trade scenarios for playbook enhancement.
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Cycle Trading Success: Strong performance in both statistical level trading and cycle-based strategies reinforced confidence in PTG’s approach.
Traders were left with valuable lessons on structure reclaims, level validation, and trend adaptation, setting a strong foundation for future success.
DTG Room Preview – December 30, 2024
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Market Performance & Outlook
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U.S. stock indices are poised to end 2024 with significant gains:
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Nasdaq 100: +30% YTD
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S&P 500: +25% YTD
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Dow Jones: +14% YTD
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Markets are closed on New Year’s Day (Wednesday).
Santa Claus Rally & Historical Context
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Currently 3 days into the 7-day “Santa Claus rally,” but stocks are struggling to gain momentum.
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All major indices declined on Friday, with the Nasdaq 100 down 1.5%.
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Historical trend since 1950:
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Positive 7-day rally → January typically bullish; S&P 500 averages a 10.4% annual return.
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Negative 7-day rally → S&P 500 averages a 5% annual return.
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Despite a poor start in January 2024, the S&P 500 is set to close the year with over 20% gains.
Market Factors
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S&P 500 earnings growth forecasted at +15% YoY, a challenging benchmark.
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Gold has surged +27% YTD, its largest rise this century, driven by:
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Monetary easing, geopolitical risks, and central bank demand.
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Bitcoin remains strong, +120% YTD, though fading from its $107K high amidst unresolved regulatory issues.
Economic & Volatility Insights
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Light economic calendar this week:
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Chicago PMI (9:45 AM ET)
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Pending Home Sales (10:00 AM ET)
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Friday’s session saw heightened volatility, a trend likely to persist through year-end.
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Limited overnight large trader volume; no notable whale activity.
Technical Levels (ES Futures)
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ES is mid-downtrend, offering opportunities for both bulls and bears:
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Resistance: 6097/94, 6402/07
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Support: 5914/17, 5842/37
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50-day MA (6032.50) is now a key resistance point after Friday’s sell-off.
Stay tuned for updates as the year wraps up.
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ES Week vs. Week
Globex morning sessions is down 1% as I type. I expect a push back above that 5981 level. Support is down at 5928. There is plenty of resistance overhead. The 6030 area is a recapture point for the bulls but right now the bears are running the table.
NQ Week vs. Week
23,515 is a crucial battle line for the tape and the bears are currently pushing below that pre-market. Below that spot is 21316 and then 20805. Over 21706 could signal a stronger finish for the year with an upside target of 21996. Weakness has to be worked out first.
Calendars
Economic
Important events for the rest of the week:
NONE
S&P 500 Earnings
Recent
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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!
This post goes out as an email to our subscribers every day and is posted for free here around 2 PM ET. To get your real-time copy, sign up for the free or premium version here: Opening Print Subscribe.
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