Rotation, Rotation, Rotation.

Small caps finally fetch a bid.

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Our View

In the new world trading order, the name of the game is rotation. 

Three weeks ago the PitBull mentioned buying the “beaten down Russell 2000” and not long after it had its best trading day in a year, rallying more than 5.4%.

The index surged as the risk-on rally extended to small caps and was up another 1.25% on Friday when most of the other indexes were struggling.

40% of the Companies in the Russell 2000 Report Negative Earning, Can You Say Rotation?

The index made a high in late July, then suffered a decline of almost 19%, making its low on October 27th. Since that low, the Russell is up 10% and at last week’s high, was up 12%. 

If you are not familiar with rotations, here is a link to read about it.

To conclude, the jump in the Russell is a big example of a year-end rotation — buying the beaten-down stocks and lightening up on the ES and NQ rally.

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 traded up to 4539.50 at 8:15 and opened at 4522.25 at 9:30. From 9:46 to 11:25 (with the exception of trading down to a new low at 4512.55), the ES back-and-filled under the VWAP in a 5 to 8 point range until the ES traded up to 4526.75. The ES traded up to 4534.00 at 2:00, pulled back to the 4526.25 level, rallied up to a new high by 2 ticks at 3:29, and then dropped down to 4514.25 at 3:43.

The ES traded 4522.75 as the 3:50 imbalance showed $835 million to buy and traded 4528.50 on the 4:00 cash close and settled at 4523.75, up 4.25 points or 0.09%. The NQ (Nasdaq futures) settled at 15,874.25, down 23.25 points or 0.15%. 

In the end, it was a slow day. In terms of the ES’s overall tone, unchanged isn't so bad after a 400+ point rally. In terms of the ES's overall trade, volume was low: 260k traded on Globex and 1.010 million traded on the day session for a total of 1.267 million.

Technical Edge

  • NYSE Breadth: 72% Upside Volume 

  • Nasdaq Breadth: 75% Upside Volume 

  • Advance/Decline: 70% Advance 

    • a 90/90 NYSE breadth/Advance-Decline on Tuesday

  • VIX: ~14 

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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