A Busy Week Begins

CPI, the Fed and Triple-Witch Opex.

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Our View

I think the S&P performed well last week. The continued back-and-fill and the 4550 level have proved impenetrable, helping to push the ES back above the 4600 level. 

We have yet to see a big up-day above 4600, but I think it's coming. 

I am keeping things light going into an action-packed couple of days. The week ahead is filled with key economic reports — with the CPI report taking charge on Tuesday — then the FOMC, rate decision, and Powell conference on Wednesday. Finally, there’s the December Triple Witching on Friday. 

I think all could have a bullish slant and see a lot of upside volatility.

Remember: Many are shifting their focus from the December futures contracts (which expire this week) to the March contracts. Double-check your levels when looking at various analyses and make sure you’re focusing on the correct contracts.

Our Lean — Danny’s Trade

This is Danny Riley’s personal trading plan for the day.

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MiM and Daily Recap

ES recap

The ES sold off down to 4561.75 after the November jobs report came in higher than expected and opened Friday's regular session at 4580.75. After the open, the ES traded 4578.25, back-and-filled at the VWAP until the ES rallied up to 4593.50, dropped down to 4595.50, and then rallied all the way up to 4610.50 at 10:20. After that, it traded back down to 4691.75 at 10:40, traded back up to a lower high at 4507.25 at 11:00 and then sold off under the VWAP down to 4588.00 at 11:26. 

The ES had a small bounce up to the 4595.50 area, sold off down to 4588.50, did a little back-and-fill under the VWAP, popped back up to the 4590.75 level at 11:59 and then dropped  9.50 points in 30 seconds down to 4581.25. After the dip, the ES rallied back up to 4611.50 at 2:40 and then traded sideways just off the high of the day until the ES printed up to a new high at 4613.75 at 3:42 and traded 4610.50 as the final market imbalance flipped from $960 million to buy to $189 million to sell. The ES traded 4607.00 on the 4:00 cash close and traded 4606.25 on the 5:00 cash close, up 17.75 points or +0.29% on the day.  

In the end, it was a big day of ups and downs. In terms of the ES's overall tone, it was a buy-the-dips kind of day. In terms of the ES's overall trade, 278k ES traded on Globex and 1.1178 million traded on the day session for a total of 1.456 million contracts traded.

A Lesson

No one knows for sure where the S&P is going next and if they say they do, it's what's called a lucky call. The truth of the matter is, that by following some basic trading rules — like don't fight the trend, or learning when the S&P is oversold/overbought and back-and-filling. 

I always say I am a bull at heart; I like buying falling knives ,but one thing we all know is that “these are not our father's markets or charts.” What looks great one second looks horrible the next. To be a good trader, you have to learn the best way to get in and out, and take profits. If you want to be a good investor, you have to pick solid companies and hold, and invest in them. 

No one taught me to read charts, but one day I ended up in Trevor Harnett's office in the CBOT building from MarketDelta. I walked in and he said, “Hey I have heard of you, I want to show you some very visual charts, like trading in the pits, you can see the order flow.” I didn't really understand that these charts were like giant candle sticks that showed what traded at every price at every tick. Trevor said you are going to need to learn how to use these charts if you are going to trade off the floor and you know what? He was right! 

Technical Edge

  • NYSE Breadth: 69% Upside Volume 

  • Nasdaq Breadth: 47% Upside Volume 

  • Advance/Decline: 57% Advance 

  • VIX: ~12.25

S&P 500 — ES Futures

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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!

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