January 10th, 2024

Russell and Rates: Currently, NQ and ES seem to be in a phase of consolidation, awaiting something to ignite a directional shift. Meanwhile, RTY and ZN (10 YR) consistently exhibit a negative bias on my charts. This correlation between RTY and ZN is sensible since if rates start to increase, the Russell 2000 stocks, which are intrinsically tied to ZN, will likely face the brunt.

ES: Though it fell just short of my neutral target (represented by the yellow line on my daily beacon indicator chart), it sustains above the 5-day SMA and YTD VWAP, for now. Yet, it still has not breached the 4820 resistance (red line on the daily chart), and the daily Bollinger Bands are still inward-facing. Hence, while bulls retain a minor advantage, a breakout is awaited.

NQ: It reached my initial downward target and surpassed the YTD AVWAP and 5-day SMA. Similar to ES though, it has yet to cross the resistance line. For now, the bulls have secured a victory, but the war isn’t over, putting NQ, like ES, in a standby mode.

RTY: As I previously stated, RTY continues to be the underperformer, falling below the YTD AVWAP and 5 Day SMA, replicating last year’s patterns. In the short term, this indicates that if I were to trade an index, I would choose to short RTY over NQ or ES. I prefer to short weak markets or invest in strong ones. At present, the only strategy on the table is selling RTY rallies, as long as ZN doesn’t sprint upwards.

ZN: It remains weak with a target of 110’25 still viable on my daily chart. It’s crucial to keep an eye on this market. If it continues its downward trend, it could exert additional pressure on RTY, which is most sensitive to rate hikes. If ZN continues its sell-off, it might draw bears back to the NQ and ES fold and drag us beneath the YTD AVWAPs.

Considering Thursday’s much-anticipated CPI, odds are today might not yield substantial revelations, but you never know. Stay patient.

Cheers, DELI