Special Update 2023_12_21

Tomorrow is the final trade day before Christmas. Stock index futures will be open regular hours. There may be some early volatility around 8:30 AM, EST as PCE is announced, but it is likely to be primarily a day of low volume.

Low volume DOES NOT necessarily imply low volatility. In fact, it makes the likelihood of sharp airpockets up and down considerable greater than usual.

The NDX and DOW are trading in all-time highs. The RUT has had a torrid advance into a critical upper KRA (Key Reference Area).

The SPX is a fraction from a new all-time high close.

The indices are increasingly likely to form Balance on the daily charts that consists of more retracment than any we have seen since the late October low. For this reason it is my guess that even if the SPX manages to spike to a new high tomorrow, or next week, the peak momentum we have seen is over prior to Balance (consolidation) consisting of range-bound trade.

From The Market Ear:

The S&P 500 has gained 16% over the last 36 trading days, one of the biggest short-term rallies we’ve seen in the last 30 years. >99th percentile historically.

And….

1 week gone in 120 minutes…”Between 2:00 and 4:00 PM ET today, the S&P 500 erased ~$600 billion of market cap. The average run rate over the 45 minutes following the initial move was ~5x greater than earlier in the cash session. To put this in perspective, the S&P 500 added ~$600 billion of market cap over the last week. The index was up for 10 straight days but erased 5 of those daily gains in 2 hours.

Those two things are related. When a market gets so compressed to one side as we saw the SPX (and other indices) into Wednesday’s top it is VERY vulnerable to that imbalance resulting in a sharp, counter-trend move.

The first point is consistent with my strong belief we are soon going to see a wide range Balance Area form, regardless of whether or not one or more of the indices trades to another rally high.

 

Merry Christmas!

SPX

Upper KRA: 4800
Lower KRAs:4697; 4625-4604

NDX

Upper KRA:16861
Lower KRAs: 16552; 16171-15919

RUT

Upper KRA: 1997-2043
Lower KRAs: 1948; 1895-1865

DOW

Upper KRA: 37641
Lower KRAs: 37073; 36465-36236

Internals

The biggest take-away here is that the 10-day MA of NYSE advancing issues is in an inredibly tight range. It’s peak momentum occurred in mid-November.