December 5th, 2023

Stuck on You. This morning, I evaluated the four major indexes – ES, NQ, RTY, YM – stripped of all indicators. Focusing solely on the price action from the past few weeks often offers the clearest perspective. Currently, a tug of war exists between Tech and Small caps with the S&P firmly tethered to the NQ. The S&P aspires to align with the Dow and Russell (since the market perennially seeks growth), however, the composition of stocks within the S&P leaves it anchored to the NQ’s frailty. This disparity renders the ES tape two-dimensional for day traders. For some, it’s an opportune trading period, but I opt for vigilance.

I swear by a simple principle: Rollover and Divergence equate to No Trade. I’ll keep reiterating this since it’s instrumental in my success as an index trader. When the Indexes cooperate, the movements are smooth and clear, but divergence contributes to turbulent markets.

Here are a few elements to track today. In the ES, I’m watching the area between the 5-day moving average (4574.25) and my daily level (4551.75). If bulls sustain a position above this region, I lean towards the long side. A drop below this area may draw in sellers. Until then, anticipate choppiness.

Currently, the NQ mildly inclines towards the short side as the spread between RTY and NQ expands. For both markets in the short term, I’m leaning towards long setups in RTY and short setups in NQ. These spreads are liable to change on a dime, so watch out for potential shifts.

On the whole, this market steers me towards the sidelines, observing patiently – ‘Look at the baby, look at the baby’ (A touch of Seinfeld humor!). Stay small and smart. Cheers, DELI.