by Danny Riley

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Will heavy AI spending continue?

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Our View

The ES is up 28% in 2024 and is on pace for back-to-back annual jumps of more than 20%—something we haven’t seen since a four-year stretch that ended in 1998. The big question is: How long can this continue?

The banks’ forecasts over the past few years have been so bad that it’s embarrassing. Remember Mike Wilson from Morgan Stanley? He lost his job because his predictions were so far off that the firm let him go.

After such a big run, it’s no surprise that some banks are scaling back their return expectations. For example, JPMorgan and Goldman Sachs are predicting the ES will reach 6,500, which would be a 7% gain. On the flip side, B of A is forecasting a level of 6,666, and Deutsche Bank thinks the ES could reach 7,000.

I think the ES will continue to rally as Trump begins to implement some of his policies, but I’m very concerned about his tariff strategies. I’m not smart enough to know how this will work but threatening Canada, Mexico, Europe, and China with increased tariffs doesn’t seem like a good idea to me. Honestly, I don’t even understand how this benefits the U.S.

Here is a couple of articles I want to pass on:
Will heavy AI spending continue? Goldman Sachs
China’s economic stimulus to partially offset US tariffs in 2025 Goldman Sachs

Our Lean

This week, there is no Fed speak, but on the economic front, both the CPI and PPI are on tap. Next week, the Fed’s two-day meeting will take place, with Fed funds futures showing approximately an 80% probability of a 0.25 bps cut. While the CPI and PPI numbers might give the ES and NQ a jolt, the bulls still dominate the tape, and that trend is unlikely to change.

If anything stands out, it’s the lack of any significant pullbacks.

Our lean: Continue to buy the dips.

MiM and Daily Recap

The ES traded in a tight 10.75-point range leading up to Friday’s NFP release at 8:30 a.m. The market initially responded positively to the print, giving a false breakdown that ran stops to 6076 before reversing and rallying to 6100.75 ahead of the regular session open. Some consolidation into the open at 6094.50 triggered a 30-minute squeeze to new all-time highs at 6111, which marked the high of the day.

Relative weakness in Crude and the YM, and a reversal from the highs eventually gave way to a little selling back through the regular session open. printing 6090.50 at 12:40 p.m. But the selling dried up as usual, and the market moved back above the open, rallying 13 points to 6103.75 by 1:20 p.m. This was all the ES could muster, selling off again and making a false breakdown with a one-tick new low on the regular session at 2:28 p.m. and then going quiet the rest of the day.

The 3:50 p.m. MIM was a non-event, showing $51 million to sell at the start. A small amount of buying into the cash close resulted in a slight drift higher, with the ES finally settling at 6096.75, up 8 points or +0.13%. The NQ settled at 21,634, up 160.75 points or +0.75%.

It was a subdued day for NFP, but a fitting end to a quiet week as the market digests its grind higher. The ES traded a total of 1.077 million contracts, while the NQ saw 449,000 contracts.

In the end, it has been a total buy fest which seems to have no end in sight. In terms of the ES and NQ tone it’s buy every pullback, there is just no selling. In terms of the overall trade, volume remains low.

How to read the MIM

Technical Edge

Fair Values for December 9th, 2024:

SP: 8.61
NQ: 31.93
Dow: 65.93

Daily Breadth Data 📊

NYSE Breadth: 46% Upside Volume
Nasdaq Breadth: 71% Upside Volume
Total Breadth: 61% Upside Volume
NYSE Advance/Decline: 44% Advance
Nasdaq Advance/Decline: 61% Advance
Total Advance/Decline: 53% Advance
NYSE New Highs/New Lows: 128 / 58
Nasdaq New Highs/New Lows: 255 / 108
NYSE TRIN: 0.85
Nasdaq TRIN: 0.63

Weekly Breadth Data 📈

NYSE Breadth: 45% Upside Volume
Nasdaq Breadth: 61% Upside Volume
Total Breadth: 55% Upside Volume
NYSE Advance/Decline: 37% Advance
Nasdaq Advance/Decline: 47% Advance
Total Advance/Decline: 43% Advance
NYSE New Highs/New Lows: 339 / 96
Nasdaq New Highs/New Lows: 604 / 285
NYSE TRIN: 1.01
Nasdaq TRIN: 0.64

MTS Levels:

How to read/use the MrTopStep Levels

Room Summaries:

Polaris Trading Group Summary Friday, December 6, 2024

General Observations:

The day opened with clarity on key trading targets, with PTGDavid highlighting initial zones and actionable levels.
The Non-Farm Payroll (NFP) print provided a catalyst, fulfilling several target zones early, setting a bullish tone for the session.
Consistent communication emphasized a long bias, which aligned well with the market’s upward momentum.

Positive Trades:

Initial Upside Target Zones Fulfilled:
- 6090-6095 on the NFP print was achieved quickly.
- For the Nasdaq, 21525 target also hit early in the session.
Crude Oil Open Range:
- Early trades successfully filled two targets, demonstrating robust strategy execution.
Nasdaq (NQ) Open Range Long:
- Triggered with strong results, achieving Target 1 at 21580 and ultimately filling all targets.
- This aligned with PTGDavid’s guidance to maintain a long bias and avoid short trades during this phase.
3410 Long Trade:
- Another successful trade completed as part of scaling into and out of positions, demonstrating the power of disciplined execution.
Three-Day Rally Target Achieved:
- Highlighted as a key milestone, reflecting sustained bullish momentum across the week.

Key Lessons & Takeaways:

Adapting to Market Momentum:
- PTGDavid emphasized staying aligned with the market’s long bias, avoiding unnecessary shorts, and scaling into profitable trades.
Importance of Strategy Discipline:
- When the “trade edge evaporated,” David opted to stay on the sidelines, reinforcing that avoiding trades in low-opportunity conditions is as important as executing winning trades.
Versatility of PTG Methodology:
- Highlighted as applicable across various instruments, providing room members with flexibility to apply strategies on instruments like NQ or ES.
Clear Communication:
- Regular updates on fulfilled targets, market bias, and exits ensured traders had a structured framework for decision-making.

Notable Moments:

Humor and Camaraderie:
- PTGDavid’s lighthearted approach (“Poof!…Annnnd it’s Gone!” and “Got to live my life…Carry On…”) added a relatable and relaxed tone to the session, balancing the intensity of trading.
Educational Tools:
- Frequent references to tools like the Daily Range Calculator, trade strategy links, and visual aids (charts and screenshots) supported learning and strategy reinforcement.

Final Reflection:

The day was characterized by early execution of profitable trades, disciplined sideline observation during low movement, and a consistent emphasis on learning and adaptability. PTGDavid’s guidance provided both a roadmap for profitable trades and lessons on when to step back. Another strong day for the PTG community, building confidence and reinforcing strategy adherence.

DTG Room Preview – December 9, 2024

Market Recap:
- Last Week’s Performance: Nasdaq 100 rose 3%, S&P 500 gained 1%, while Dow Jones slipped 0.5%. Big Tech stocks, led by the “Magnificent Seven,” significantly outperformed the S&P 500.
- Tech Bubble Speculation: Technology stocks are outperforming the S&P 500 by 33% on a 3-year rolling basis, compared to 252% during the dot-com bubble.
Economic Updates:
- Jobs Data: The U.S. added 7K more jobs than expected, but unemployment edged up to 4.2%.
- Fed Policy Watch: This week’s focus is on Wednesday’s CPI and Thursday’s PPI. Current odds favor an 85% chance of a 25-bps Fed rate cut next week, with inflation data holding potential to shift expectations.
Crypto and Global Markets:
- Crypto Surge: Bitcoin ETFs saw $9.9B in inflows post-election, nearing $113B in assets. Ether ETFs, now up $2B, outperformed Bitcoin. U.S. Republicans are showing increased support for crypto.
- China’s Policy Boost: Chinese leaders announced plans for “moderately loose” monetary policy in 2025, propelling Asian markets higher; Hong Kong jumped 2.8%.
Corporate and Economic Highlights:
- Earnings: This quiet earnings week features Broadcom (AVGO), Costco (COST), and GameStop (GME), with Toll Brothers (TOL) reporting today after market close.
- Economic Calendar: Key report today is Wholesale Inventories at 10:00 AM ET.
Market Trends:
- Volatility: Volatility remains subdued, with the ES 5-day average daily range down to 31 points and the VIX near 13, its lowest since August.
- Key Technical Levels (ES Futures):
  - Resistance: 6122/25, 6136/39
  - Support: 6005/10, 5878/83
  - Bears have room to test the lower bounds of the short-term uptrend channel.
Outlook:
- Central bank announcements this week from the ECB, Bank of Canada, Swiss National Bank, and Australia’s RBA will influence global market directions.
- U.S. equities face a potential quiet close to the year unless inflation data or Fed policy sparks volatility.
Stay tuned for updates as critical data and events unfold.

ES Week vs. Week

Reading through last week’s Monday comment, ES had made new contract highs on Friday. That comment repeats for this week with 6111 even as the new tag spot. Markets are pretty flat. ES did not close above the 6100 level so that remains a reasonable goal for the bulls. Support is at 6094.75 and then 6086. Upside is 6112 and then 6174 on the big reach. The bulls seem happy with where they are as they book their profits and rotate into 2025’s lineup.

NQ Week vs. Week

NQ is enjoying some new highs tagging that 21,647 we called out on Friday. New highs are in at 21,706. Support is at 21,171 and then 20,682. Upside, we see 21,755 as a tag point. Expect a trading range for the day in the 180-point range