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When Will The Trump Rally Stall?
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Our View
The market acted toppy, and why shouldn’t it? Up six days in a row for a gain of over 320 points. Today, we have one economic report: the NFIB Optimism Index and some Fed speak from Fed Gov. Christopher Waller, Richmond Fed President Tom Barkin, and Philadelphia Fed President Patrick Harker. I still think there is a lot more upside, but my concern right now is the index markets being overextended. The main event this week is Wednesday’s PPI report, which comes after the Fed cut rates last week, with another rate cut likely during the Fed’s two-day meeting on December 17th and 18th.
Our Lean
No one can deny that the index markets have gone a long way. Some traders think it’s already gone too far, but I don’t think so. I believe a good pullback, along with some back-and-fill action, will lead to new all-time highs and my 6300 ES target. Yes, there have been a few pullbacks, but compared to the size of the rallies, they tend to be small (2-4%) and immediately turn into a rally and a new contract high.
I understand that everyone uses their own trading tools, but one of the best ones is the Stock Trader’s Almanac. The historical studies have been very accurate this year. To remind everyone, the week of November options expiration has the Dow up 19 of the last 30 occasions. The November options expiration has the Dow up 15 of the last 21 occasions. And last but not least, long into weakness for Thanksgiving and exit into strength. Here is a link to purchase the Almanac online at Walmart, which is the best deal I could find: Stock Trader’s Almanac at Walmart.
Our lean: is that it could get a little bumpy over the next few days. I can’t rule out selling a big gap-up open or some easy rips, but I am inclined to buy on weakness even if it’s down 50 to 80 points. Trade less and pick your spots better.
Goldman Sachs:
We expect a 0.31% increase in October core CPI (vs. 0.3% consensus), corresponding to a year-over-year rate of 3.30% (vs. 3.3% consensus). Additionally, we project a 0.19% increase in October headline CPI (vs. 0.2% consensus), reflecting 0.2% higher food prices but 1.3% lower energy prices. Our forecast aligns with a 0.24% increase in CPI core services, excluding rent and owners’ equivalent rent, and with a 0.24% increase in core PCE in October.
Our October core CPI forecast is roughly in line with the pace of August and September but is above the +0.14% average from the preceding three readings. Those softer readings were influenced by significant declines in the airfares component—down 3.4% on average—and the used cars component, which fell 1.1% on average. In October, we anticipate increases in airfares (+1.0%), driven by a modest boost from residual seasonality and strong pricing trends, and in used car prices (+2.5%), reflecting a rebound in auction prices.
We highlight two additional key component-level trends expected in this month’s report:
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Car Insurance Prices: We anticipate a continued, though decelerating, increase in premiums, leading to a firm rise in car insurance prices.
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Health Insurance: We expect the health insurance component to remain roughly flat this month as the BLS incorporates updated source data on insurance premiums.
Looking ahead, we expect monthly core CPI inflation to remain around 0.2% for the rest of the year. Further disinflation is likely over the next year, stemming from rebalancing in the auto, housing rental, and labor markets. However, we foresee some offsetting upward pressure from catch-up inflation in car insurance. By December 2024, we forecast year-over-year core CPI inflation at 3.1% and core PCE inflation at 2.7%.
MiM and Daily Recap
The ES rallied up to 6053.25 on Globex and opened Monday’s regular session at 6052.00 After the open, the ES traded up to 6045.24 at 9:42, sold off down to 6029.00 at 10:27, rallied up to a lower high at 6043.50 at 10:42, sold off 10.25 points down to 5033.25 at 11:33, rallied 3 points up to 6039.50, and then sold off 26 points down to 6013.50 at 1:24. After the low, the ES rallied 16.75 points up to 6030.25 at 1:54, sold off 6.25 points down to 6023.25 at 3:12, and then rallied up 5.75 points to 6030.00 at 3:42. The ES traded 6025.00 as the 3:50 cash imbalance showed $514 million to sell, started to go bid, and traded 6032.00 on the 4:00 cash close. After 4:00, the ES traded down to 6025.00, did a small sideways grind, and settled at 6031.75, up 6.50 points or 0.11%. The NQ settled at 21,210.25, down 21 points or +0.10%, the YM settled at 44,419.00, up 278 points or +0.63%, the RTY at 2,447.60, up 35.20 points or +1.46%, gold futures fell 2.8% to $2,611.20 per troy ounce, the biggest one-day slide in more than three years, oil prices continued recent declines with Brent crude slipping 2.8% to $71.83 per barrel, Bitcoin surged above 87,000, the dollar strengthened, and the bond market was closed for Veterans Day.
In the end, the ES has been up six days in a row. In terms of the ES’s overall tone, I was right about selling the open; the ES and NQ had just gone too far. In terms of the ES’s overall trade, volume was low at 1.015 million contracts traded.
Technical Edge
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Fair Values for November 12, 2024
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S&P 500: 25.87
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NASDAQ (NQ): 102.32
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Dow Jones: 142.18
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Daily Market Recap 📊
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NYSE Breadth: 62% Upside Volume
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Nasdaq Breadth: 71% Upside Volume
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Total Breadth: 68% Upside Volume
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NYSE Advance/Decline: 57% Advance
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Nasdaq Advance/Decline: 56% Advance
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Total Advance/Decline: 56.5% Advance
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NYSE New Highs/New Lows: 433 / 29
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Nasdaq New Highs/New Lows: 593 / 110
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NYSE TRIN: 0.80
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Nasdaq TRIN: 0.55
Weekly Market 📈
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NYSE Breadth: 62% Upside Volume
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Nasdaq Breadth: 66% Upside Volume
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Total Breadth: 64% Upside Volume
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NYSE Advance/Decline: 78% Advance
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Nasdaq Advance/Decline: 68% Advance
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Total Advance/Decline: 72% Advance
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NYSE New Highs/New Lows: 663 / 131
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Nasdaq New Highs/New Lows: 899 / 361
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NYSE TRIN: 1.18
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Nasdaq TRIN: 0.95
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VIX: 15.2
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Guest Posts
Daniel Salguero – @tradrr.com
Hard to argue with the clear short-term direction in treasury futures, given the large set of recent bearish developments. It’s ideal to stay wary on longs until something fundamental shifts. Coming into this week, several Fed speakers will make appearances alongside CPI and PPI data. These could either push bonds down further or allow some reprieve, potentially filling the gap that started this week.
Room Summaries
Polaris Trading Group Summary – Monday, November 11, 2024
On Monday, November 11, 2024, PTG’s trading session was characterized by a generally two-way rhythm, aligning with Cycle Day 2 expectations for consolidation and range-bound movements. David Dube (“PTGDavid”) guided members through a primarily short-biased trading day with notable success on key trades, especially in the Nasdaq (@NQ) and S&P 500 (@ES).
Key Highlights:
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Early Short Trades: The session began with a successful short position in @NQ’s Opening Range (OPR), which hit all targets, setting a bearish tone early on.
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Dynamic and Fixed Support/Resistance Levels: David identified a critical “Line in the Sand” (LIS) at 6040, with the level of 6025 also emerging as an important reference point as the day progressed.
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Market Structure and Reversal Plays: The “Look Above & Fail / Reversal” (termed “The Whiplash”) was triggered, indicating a significant reversal setup, which was then reinforced by successful continuation trades at levels like AR10 and 3410.
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Range-Bound Conditions: As expected for Cycle Day 2, the market traded within a tight range with limited volatility. The bond market holiday contributed to a quieter session, with David advising patience to avoid overtrading.
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Afternoon Short Target Success: In the afternoon, David’s target of 6025 was successfully hit, reinforcing the short plays. Lower targets of 6015 and 6010 were also achieved, exemplifying adherence to the Daily Trade Strategy (DTS).
Lessons and Insights:
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Patience in Low-Volatility Conditions: David emphasized the importance of not overtrading in a range-bound, low-movement environment. His guidance to wait for prime opportunities highlighted the value of disciplined trading.
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Effective Use of Initial Balance (IB) Levels: The Initial Balance served as a critical reference for counter-response trades, with David authorizing “long probes on dips” in alignment with Cycle Day 2’s typical back-and-forth action.
Closing Remarks: The day’s strategy aligned well with the DTS plan, ending with a Market-On-Close (MOC) sell imbalance and reflecting normal Cycle Day 2 rhythms. David noted that a positive price level above 5990 for Cycle Day 3 could support a potential 3-day rally.
Discovery Trading Group Room Preview – November 12, 2024
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U.S. Markets Rally: The S&P 500 closed above 6,000, and the Dow surpassed 44,000, marking record highs. However, the Nasdaq 100 stayed flat as tech giants Nvidia (NVDA), Apple (AAPL), and Meta (META) weighed on the index. Tesla (TSLA) soared 8%, reaching two-year highs and crossing a $1 trillion market cap, fueled by ongoing optimism about a potential Trump presidency.
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Crypto Surge: Bitcoin surged 30% post-election, trading above $89,000, with market expectations for it to cross $100,000 by year-end. Coinbase (COIN) and Robinhood (HOOD) rose in parallel with Trump’s promise of a “strategic national bitcoin stockpile,” energizing the sector.
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China Market Drop: The Hang Seng China Enterprises Index fell 3.1%, with the yuan hitting a 3-month low. Anticipation around Trump’s aggressive China policies, including potential tariffs and the appointments of Rubio and Waltz, spooked investors.
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Upcoming CPI and Fed Moves: The October CPI release on Wednesday is seen as the next test for market resilience. Fed Chair Jerome Powell avoided comments on potential Trump policy impacts on Fed decisions.
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Earnings and Economic Calendar: Earnings releases include Home Depot, AstraZeneca, and others. The economic calendar is light, with Fed speakers scheduled, including Kashkari’s interview on Yahoo Finance at 2:00 PM ET.
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Volatility & Technical Levels: Volatility is contracting as the S&P nears highs, with the ES (E-mini S&P) consolidating above recent support levels. Traders are eyeing support at 6018/21s and resistance around 6057/60s. Whale bias remains short heading into the U.S. open.
NQ – Nasdaq 100 Futures
Still Consolidating the Trump Rally. Watch 6000 to hold
NQ – Nasdaq 100 Futures
Same as ES except that 20900 area needs to hold.
Economic Calendar
Earnings Today:
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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