Year-End Rally Gaining Momentum

CPI and Retail Sales on tap this week

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Our View

Well, I had it right about selling the open and the early rally, but I didn’t catch the rip — although @TheRealTraderDave from the MTS chat did and he totally killed it.

I could kick myself because, after the low and subsequent pop, I tried to sell it a few times and gave up. That is not something I generally do, but I had a decent week and didn’t want to chase.

I also did not think the ES would rally almost 70 points, but that’s the great thing about the MTS trading room…if I don’t have it right, someone else does. It truly is a collective of great traders that are all sharing.

This week has a busy economy and earnings schedule. It will be a test of consumer spending as we go into the holiday shopping season. Tuesday starts out with the October Consumer Price Index (CPI) report, which traders will be paying close attention to after last week’s Fed speak about future rate hikes.

Wednesday is the October retail sales number, which is a key read on the state of the consumer. It is also a big week for earnings. Some of the big-box retailers reporting this week include: Home Depot (HD), Target (TGT), and Walmart (WMT), Macy’s (M), TJX Companies (TJX), and BJ’s Wholesale (BJ).

Our Lean

I covered my shorts at 4155 and went long at 4163. I made 65 points on the trade and while I have made decent money scalping both long and short, things could have been made easier by just staying long.

Friday’s pop sent the major US indexes to their highest closing levels in nearly two months. However, late in the day Moody’s had changed its outlook on the US government’s debt to “negative” from “stable,” as elevated interest rates raise the cost of servicing the government’s growing debt pile. Further, a top analyst at Moody’s said political polarization in the United States will likely complicate budget-making decisions ahead of the 2024 presidential election, which could delay any change of the rating agency’s outlook on the government back to a stable outlook.

Lots of moving parts here, folks — and let’s not forget the risk of another government shutdown.

Our Lean: There is a high likelihood that the ES keeps going up right into the end of the year. Can it take out the 4808 contract high? It could, but I’m not sure about that. What the ES needs now is a pullback and a few days of back-and-fill. Sell the early rallies and buy the pullbacks.

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

Upside: Hourly close above 4422 targets 4:15 settlement at 4431.50. Trade above there targets 4435.50, hourly close above there targets 4451.85 (likely), then 1 sd at 4459.66. Trade above there targets 4464.27, then 4471.60. Hourly close above there targets 2 sd at 4487.82.
Downside: Trade and hourly close below 4422 targets 4415.75, then 4409.50. Hourly close below there targets -1 sd at 4403.34. Hourly close below there targets 4399.51 then 4395.38***, (Daily close below here is a negative). Hourly close below there targets 4392.75, then 4388.51. Hourly close below there targets -2 sd at 4375.18, then 4374, then 4372.

MiM and Daily Recap

ES 15-min recap

The ES traded up to 4383.00 at 9:00 am on Globex and traded 4383.75 on Friday’s regular session open. After the open, the ES traded down to 4372.25, traded up to 4386.50 at 9:46 and then sold off to a double bottom at 4367.75. It was that low that set off the ~68-point rally.

The ES rallied up to 4378.00, made one last downtick under the VWAP at 4373.50 and then made 8 new highs in a row: 4393 at 11:10, 4399.00 at 12:13, 4410.75 at 12:29, 4411.75 at 12:46, 4414.50 at 11:56, 4222.00 at 1:51, 4423.50 at 2:25, 4424.00 at 2:52, 4430.25 at 3:40. The ES traded up to 4433.00 at 3:48 as the early imbalance showed $234 million to buy and traded 4431.00 as the 3:50 cash imbalance showed $2.1 billion to buy and traded 4435.50 on the 4:00 cash close. After 4:00, the ES remained in a tight range and settled at 4424.50 on the 5:00 futures close, up 68.25 points or 1.56% on the day.

In the end, the only real sale was off the open. After that, it was all buy stops and buy programs. In terms of the ES’s overall tone, it was extremely firm. In terms of the ES’s overall trade, volume was steady: 264k traded on Globex and 1.398 million traded on the day session for a total of 1.642 million contractsde

Technical Edge

NYSE Breadth: 69% Upside Volume
Nasdaq Breadth: 62% Upside Volume
Advance/Decline: 73% Advance
VIX: ~15

ES

Levels from HandelStats.com

ES Daily

Upside: Hourly close above 4422 targets 4:15 settlement at 4431.50. Trade above there targets 4435.50, hourly close above there targets 4451.85 (likely), then 1 sd at 4459.66. Trade above there targets 4464.27, then 4471.60. Hourly close above there targets 2 sd at 4487.82.
Downside: Trade and hourly close below 4422 targets 4415.75, then 4409.50. Hourly close below there targets -1 sd at 4403.34. Hourly close below there targets 4399.51 then 4395.38***, (Daily close below here is a negative). Hourly close below there targets 4392.75, then 4388.51. Hourly close below there targets -2 sd at 4375.18, then 4374, then 4372.

NQ

NQ Daily

Upside: Trade and hourly close above 15562.50 targets 4:15 settlement at 15604.50. Hourly close above 15606.40 targets 15652.25, hourly close above there targets 15710.25. Above there targets 1 sd at 15746.54. Hourly close above 15754.40 targets 15818.25, then 15836.75, then 15867, then 15872, then 15883.75, then 2 sd at 15888.57.
Downside: Trade and close below 15562.75 targets 15538.25, then 15513.75. Trade and hourly close below 15510.20 targets 15477.77, then -1 sd at 15462.46. Hourly close below there targets 15415.50 — daily close below here is a negative — hourly close below there targets -2 sd at 15303.