Can Santa Come to Town Early? | TSLA, ARKK, MU, CGC

Some great trading opportunities were here yesterday.

Breadth was fairly terrible yesterday, coming in at an 80% downside day even after the late-day rally. At one point earlier in the session, the NYSE was sitting with a near-90% downside day. 

But there was something odd about the day: As much as we lacked upside traction, we were also lacking downside traction despite the lower open. The ES and NQ undercut the overnight Globex low shortly before noon and then bounced, holding that low for the day. 

It was hard to be overwhelmingly bullish, but it was clear the downside felt limited. 

The Game Plan

As for our approach to Tuesday, we put ourselves in a good position on Monday. We respected the lower open in the indices but went with the relative-strength leaders near the open. 

Now let’s see if we can ride those into some nice gains ahead of the holiday, while seeing how the market handles this morning’s gap-up. I’d love a strong day for the bulls but an opportunity to get long on a potential morning dip.

Remember: It’s a short week. When in doubt, stay out. No forcing.

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Technical Breakdown 

• NYSE Breadth: 80.9% downside volume (!)

• NASDAQ Breadth: 69.3% downside volume

S&P 500

S&P Futures Weekly | Click to Enlarge

Have a look at the S&P futures, which are bouncing overnight. The futures bounced right off the 21-week moving average, a measure that has been pretty solid support over the past year. 

With the bounce, the ES is now back above the 10-week moving average as well. 

A move above this week’s high could put 4700-4712 back in play. Remember, as bad as the action has felt, the ES made new all-time highs on Thursday and remains in an uptrend. 

The “line in the sand” for the ES now sits at this week’s low (4520) and the 21-week moving average. Breaking these marks and failing to recover them is discouraging for the bulls, to say the least. 

Nasdaq