Short Term Trading Week Starting: 3 December 2018, page-23

Happy Tuesday traders,

US indices on Monday's close: SPX: (+1.09%), IXIC: (+1.51%), Dow: (+1.13%) and RUT: (+1.02%)

S&P Sectors: Energy (+2.2%), Consumer Discretionary (+2.21%) and Technology (+2.11%) were followed closely by Materials (+1.75%) and Industrials (+1.16%). Everything else was moderately green except for Consumer Staples which was pretty flat.

ESZ18 SPX futures gapped from Friday's 2764 to 2793.5 and made a quick high of 2809.75. There was a new overnight high of 2814 by 03:00 ET, followed by a gradual decline to the cash open of 2801.25. The cash market took price down from there to the 2775 area which corresponds with the 50% retrace of the October high. The cash session action was balanced out at around 2785, with most business taking place between 2783 and 2788. ES closed at 2791. SPX/ES is now over the 50 day moving average and still under 2812 resistance.

Some were expecting derivatives dealers to have to buy futures contracts on the open today to hedge against their neutral delta and a falling VIX (16.44 or -9.02%) There is quite a bit going on here, but the typical explanation for the fade of the futures high is that the news out of this weekend’s smiley face session was a potentially short acting antidote when taken in the context of the broader themes that have been drummed into our nervous systems over the past year. In other words, we have shell-shock and are keen to make way for the surprises we know we can get from time to time from those who would keep the world and those who trade it in their heels. To that end, US treasuries are for now biding their time as ES futures pause and take a breath.

NYSE Internals
Breadth was pretty good, but the large overnight move in the futures may have made this more of a consolidation day. NYSE A/D lines: +1363 NYSE breadth: + 3.31:1 and NASD breadth: + 3.53:1. TICK cumulative was positive and trending higher from mid-session. Cumulative rolling tick is starting to turn up, and NYMO: 49.3168 headed back up. NYSE MOC saw a moderate sell side going into the last quarter hour, but flipped positive in the last minute and settled at -9M to sell. Not bad in the wake of Friday’s large buy side.

Treasuries
ZN futures (119'250) saw a very wide ranging session, dropping hard on Sunday night, swooping lower during the overnight session and finishing the cash market session higher than Friday's closing print. In other words, the euphoric equity response did not deter buyers of US debt. The 2-year (+1bp to 2.82%) to 10-year (-2bps to 2.99%) spread is now at 17 points. The 2-year to 30-year (-4bps to 3.27%) spread is now 45 points.

Incoming
Auto Sales and Truck Sales for November are out at 14:00 ET tomorrow.