December 4th, 2023

Good Morning @everyone A Tale of Different Tapes. One principle I’ve adhered to since my early days of day trading is this: when the indexes all align, I place my largest positions. This alignment can often signal the clearest potential for movement. Conversely, when the indexes diverge—with contrasting charts—I either trade minimally or not at all, anticipating a two-way, uneven market. Day traders may dislike the advice to trade small or step back, but that’s the observation I make. It’s my choice to accept or wrestle with it. Resisting a divergent market is akin to claiming victory in a boxing match against a UFC fighter. You might land a punch or two and dodge around the ring, but eventually they will land a hit, sending you to the mat.

Why do I say we’re so divergent? Look at the daily charts of ES, NQ, RTY, and YM. Each one narrates a different story. ES is attempting to rally further but faltering. NQ, formerly leading the rally, is starting to lag. RTY and YM are surging as if rejuvenated by the elixir from Indiana Jones and the Last Crusade. Remember, the cleanest index movements occur when they synchronize, not when they diverge.

Here are some levels to monitor today. The ES 60-minute chart suggests we’re likely confined between 4601.50 and 4568.50. Any worthwhile trades would occur at tests of these levels. In between, it’s probably a choppy market. Looking at the daily chart, the zone I am monitoring is between the 5-day moving average (4575.25) and my daily level (4551.75). As long as bulls maintain a position above that zone, I favor the long side. Below that zone, sellers might begin to engage.

The NQ is currently trapped between the same levels I discussed last Monday: 16,097 – 15,860. We’ve bounced off these levels multiple times and until we break free of this range, these are the levels to keep an eye on.

At the moment, both the RTY and YM are in full bullish mode. They’re catching up to the ES and NQ as the year draws to a close and frankly, I’m reluctant to trade them any differently than long. Given the upcoming rollover and their daily appearance, these aren’t markets we fade – instead, we utilize short-term charts to locate opportunities to go long.

Today, I’m opting to stay on the sidelines again. This particular tape just isn’t one I feel comfortable trading. At some stage in your career, you’ll find yourself scrutinizing tapes you know will be a struggle and decide, I’m going to choose the battles I know I can win, not the ones I might win. Keep it small and smart, everyone. Don’t spoil Christmas. Cheers, DELI

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