S&P Futures Rallying with Resistance Overhead
The S&P put in a Gravestone Doji for the month of November, similar to January of 2020. The month of November closed with heavy selling during and after Black Friday.
In my opinion, the recent S&P rally is very unhealthy and reminiscent of the January/February 2020 price action. In January 2020 we had a similar Gravestone Doji with markets rallying to new ATH's in early February then finishing much lower for the month. The heaviest selling was yet to come in February and March. Obviously, we have different circumstances today however we do still have tail risk.
The November 2021 selling was due to something very common in trading. Where price drifts below a long term ascending wedge, with a brief selloff, then runs up alongside it. On November 5th price touched the March 2020 ascending wedge resistance only to roll over and selloff after Thanksgiving.
ES_F is doing just that, running back up to the same trend line resistance we sold off from in November.
Apple has been carrying the S&P and I believe much of the December rally is due to a short squeeze and that when we meet that resistance level overhead, it could erase the gains we have seen this month and December could actually close bearish, leading to heavier selling in January.
The VIX likes to close all gaps and the recent VIX gap down was left open up to 27. I think this is a short term squeeze that has the appearance of a Santa rally with a lot left to be proven.
HYG has been constructive so far this week but I am not sold that this is the beginning of a new risk on cycle and believe we have a lot left to prove to close out the month. Time will tell.
In my opinion, the recent S&P rally is very unhealthy and reminiscent of the January/February 2020 price action. In January 2020 we had a similar Gravestone Doji with markets rallying to new ATH's in early February then finishing much lower for the month. The heaviest selling was yet to come in February and March. Obviously, we have different circumstances today however we do still have tail risk.
The November 2021 selling was due to something very common in trading. Where price drifts below a long term ascending wedge, with a brief selloff, then runs up alongside it. On November 5th price touched the March 2020 ascending wedge resistance only to roll over and selloff after Thanksgiving.
ES_F is doing just that, running back up to the same trend line resistance we sold off from in November.
Apple has been carrying the S&P and I believe much of the December rally is due to a short squeeze and that when we meet that resistance level overhead, it could erase the gains we have seen this month and December could actually close bearish, leading to heavier selling in January.
The VIX likes to close all gaps and the recent VIX gap down was left open up to 27. I think this is a short term squeeze that has the appearance of a Santa rally with a lot left to be proven.
HYG has been constructive so far this week but I am not sold that this is the beginning of a new risk on cycle and believe we have a lot left to prove to close out the month. Time will tell.