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Week of December 17th

Updated: Dec 19, 2023

Last week was a wild one! We had a endless supply of news events such as CPI,PPI, the FOMC announcement, and of course the all-time record sized Quad Witching roll of the index futures contracts.

So where do we go from here?

The upside is that now all that stuff is behind us - so this week should be much calmer and volume will get VERY light heading into the end of the week as we near the Christmas holiday. Markets will be open next week but I really doubt that we will see much movement as everyone will be gone.

This week, I want to cover a few of the macro things that are sending mixed signals, but I'll outline what moves I am looking for from the context of the week ahead.

DXY: Ever since the markets bottomed in October, DXY has been in a steady downward decline. Studying the weekly chart - we can see that all DXY really did was sweep the External Range Liquidity (ERL) and thus we needed to pullback to some FVGs to balance price out.

From my perch, I am looking for the DXY to resume its rally from these levels. If we actually get a rally in the DXY from here, it will also rally the 10yr - which will cause massive pressure on indexes (which I will cover later).

10yr Interest Rate: For as "clean" as the DXY chart looks, the story is even more clean on the 10yr. Again - the top of the interest rate rise was the market bottom in October - and the 10yr so far is respecting the FVG as a IRL sweep. This week, I want to watch to see if the 10yr bounces from here to resume its monthly climb higher. If the 10yr starts to bounce from here, it will rally the DXY alongside it, and of course pressure will come to stock indexes. If the 10yr continues to fall from here - that isn't bullish risk either as it signals the debt markets are pricing in slowing growth,

If you watch CNBC - all you will hear is about how rate cuts are done, the fed has pivoted, and fighting the fed all year long was the most profitable thing to do. I trade charts and not news, so I am actually looking for rates to climb from here - and my next target would be those equal highs up around 5.26% - levels not seen since 2007.

The key driver behind rising rates is the outright abuse of money printers on a global scale - the ONLY thing that can tie the hands of these central bankers, is if the market prices in higher rates.

VIX: We FINALLY got the VIX to fill is last lower daily gap from 2020.

With this past week being OPEX - there is a 0% chance they would let any volatility back into the markets as they wanted to pin price somewhere for max pain on options. Hopefully this week, we see VIX rise from the ashes

AAPL: The worlds most important stock did something interesting this week as it reached for All time Highs (ATH).

AAPL reached right for the buy stops above ATH - and even retraced 20-30% of the weekly candle in the classic TGIF trade. From here, I am looking for lower time frames such as the 4h and 15m to show me a sell program has been enabled - with my initial target of down around 181 area for that weekly FVG/CE.

Energies: OIl & Natural Gas look to be bottoming down here, but it could just be a reaction to the DXY - I want to give them another week to present cleaner charts before I engage them.

Indexes: We will start with the Nasdaq and cover the Russel as well.

Nasdaq - we finally got the full roll of volume from the December to the March contract. In doing so - they managed to run the ATH on the continuous contract.

For the NQ front month - I am looking for a sizeable pullback. Between the confluence of sentiment, where DXY and Rates are, as well as overall technical construction - this market is WAY overbought. From HERE, I will be looking signs of a reversal on the 4h as well as the 15m charts - and my first target is going to be last weeks low around 15917. This makes sense as the next draw on liquidity as its the CE of a weekly FVG, as well as it being a swing low on the weekly chart.

IF we can break that 15917 level an really get going, it will confirm we are on a weekly sell program - and I would wants to see the weekly FVGs taken out at 15550 and 15250 with the ultimate target of being the October lows. Once we get down there, I can reassess the game plan.

Small Caps - The Russell has been in a in a sideways chop zone now for 14 months - which is fine as range trading is great as long as you just play the swings from zone to zone.

The Russel once again ran weekly stops this past week, and I am now scouting for a reversal into a sell program on the 15m and 4h charts. We ALMOST got the reversal pattern on the 15m chart- but they might be saving that for this week.

The Russel managed to run from the LOY to the HOY in 7 weeks - a new record for the index.

This week - Looking for the start of a sell program with initial targets being 1779. If we can clear these FVGs and keep going lower - then the target for indexes are the Oct lows.

Overall, the markets have felt very panic-bid over the last 7 weeks. This makes me wonder if the Market Makers were trapped long the December contract and couldn't get out until ATH due to liquidity for order pairing.

12/19 Update:

They FINALLY filled the last VIX gap from the class Monday Gap up - just as they got /ES to run its ATH.

We now have ES, NQ, YM all at ATH - with RTY at HOY - all while we have VIX hovering at Pre-Covid Levels.

The 10yr also just went green on the week

The key moving forward will be to continue to watch the rates markets and scout for a 4h and 15m reversal pattern on indexes.

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