12/26 Trading Plan - Last Weeks Recap and Tuesday Trading Plan

📊 Market Sentiment: Cautious Holiday Trading

As we continue the holiday week, trading volume and liquidity are expected to decrease significantly with the exit of institutional money and many professionals on break. This typically results in choppier and less predictable price action, increasing the potential risk for traders. The holiday trading mode is expected to bring more subdued movements with occasional sharp volatility.

📝 Recap: Historical Santa Rally Period

Last week, there was a noted failed breakdown of the overnight 4785 low, which occurred late in the trading day. The focus remains on key support and resistance levels, with a cautious eye on the choppier market dynamics typical of this time.

🌏 Major Global Catalysts

1. Stock Market Momentum: The S&P 500 is approaching record levels, carrying momentum into the shortened trading week after marking an eight-week winning streak. Investors are looking forward to the "Santa Claus Rally," a period of traditionally good days for stocks during the final five trading days of the year and the first two of the new year.

2. Mortgage Rate Trends: Mortgage rates have dropped significantly, reaching their lowest level since mid-June. This decrease comes after the Federal Reserve indicated a likelihood of cutting the federal funds rate in the upcoming year. The lower rates are expected to increase homebuying activity in 2024.

3. Global Market Movements: US equity futures edged higher, and the dollar remained stable as markets resumed post-Christmas. Asian stocks were mixed in light trading, with gains in emerging Asian currencies against a weakening dollar. Deal news, including the sale of Manchester United, lifted shares of some US-listed companies.

4. Economic Forecasts: Analysts predict the global economy will slow further in 2024 despite easing pressures. Factors such as geopolitical tensions, the state of the US and Chinese economies, and the US presidential election will play significant roles in determining economic outcomes.

5. Stock Market Review: The S&P 500 is on track to finish 2023 with a gain of about 21%. Despite various challenges, including inflation and rising interest rates, the US economy has shown resilience, and corporate profits are on the rise. Technology stocks have regained their lead, with mega-cap tech stocks contributing significantly to market gains.

6. Gold Market: Gold prices have increased, heading for their first annual gain in three years. This rise is attributed to expectations of Federal Reserve rate cuts in 2024 and a weaker US currency.

7. Corporate News:

• Samsung has delayed production at its new US factory until 2025.

• Intel plans to invest $25 billion in Israel after securing incentives.

• Manchester United's ownership saga concludes with a $1.3 billion deal involving Ratcliffe.

8. Emerging Markets: Goldman Sachs reflects on the lessons learned from a misjudged bet on China's post-pandemic recovery. The bank had anticipated a significant rally in Chinese stocks and a broader boost to emerging markets, which did not materialize as expected.

9. Oil Market: Oil remains in focus amid geopolitical tensions, with the market watching for potential impacts on supply and prices.

10. Cryptocurrency: The ousted Binance founder CZ's fortune grew by $25 billion in 2023, and Nigeria has allowed banks to open accounts for crypto firms, signaling a shift in the regulatory landscape for cryptocurrencies.

📷 Snapshot

Daily

Daily Data Sentiment Analysis:

• EMA 9, 21, 55: Indicating a bullish sentiment with closing prices above these EMAs.

• Overall Sentiment: Bullish.

4-Hour

4-Hour Data Sentiment Analysis:

• EMA 9, 21, 55: Indicating a bullish sentiment with closing prices above these EMAs.

• Overall Sentiment: Bullish

📉 Support Levels

Major Support Levels:

• 4795: A pivotal major support, holding key significance for upcoming trading dynamics.

• 4779-83: Another crucial major support zone, acting as a potential turnaround point in the market.

Minor Support Levels:

• 4772, 4766, 4750-55, 4741, 4734, 4724, 4719, 4708-10, 4699, 4690, 4682, 4678, 4670, 4660-63, 4648, 4641, 4630-33, 4624, 4614, 4606.

📈 Resistance Levels

Major Resistance Levels:

• 4800: The first line of major resistance, potentially leading to more significant market reactions.

• 4808 and 4812-15: Described as a heavy, messy resistance zone; crucial for the day's trading strategy.

Minor Resistance Levels:

• 4825, 4830-33, 4838, 4847, 4853, 4860, 4867, 4877, 4883, 4890, 4894, 4905-07, 4914, 4925.

📝 Trading Plan

Bull Case Analysis:

• Current Sentiment: The market is showing continued bullish momentum, with the S&P 500 futures (ES) indicating resilience and an upward trajectory.

• Key Strategy: Focus on established support zones, particularly around 4740-45, to initiate long positions. It's critical to avoid impulsive trading and wait for the market to come to these levels.

• Upside Targets: Maintaining above 4740-45 could propel the market towards the next levels of interest at 4767 and 4788. For a significant bullish continuation, eyes are on surpassing the 4810-12 threshold.

• Risk Consideration: Despite the prevailing bullish sentiment, be mindful of recent selling pressures and market shifts. The landscape can change swiftly, requiring constant vigilance.

Bear Case Analysis:

• Market Vulnerability: The market stands at a pivotal point; a drop below the 4740 support could shift the trend to bearish.

• Critical Levels: The 4740-45 zone is crucial; a breakdown here could serve as an early bearish indicator.

• Short Entry Points: If weakness appears, consider short positions near 4736 but ensure to avoid rash decisions. Wait for confirmatory signals.

• Downside Targets: A confirmed bearish trend could open opportunities towards 4715 and 4705-08 as initial targets for bearish profits.

Overall Outlook:

• Bullish Trend Continuation: The bullish outlook is contingent on the market's ability to hold and rebound from the 4740-45 support area.

• Key Levels to Watch: Keep a close watch on 4740-45 for support and 4767 & 4788 for potential resistance or breakout points.

• Resistance Testing: Be attentive to how the market reacts at established resistance levels, as a breakthrough or rejection can dictate the next move.

• Risk Awareness: Anticipate increased volatility and the possibility of both upward and downward movements, staying ready to adapt as needed.

• Strategy Adaptability: Flexibility in strategy will be key, especially in responding to real-time market changes and sentiment.

Today’s Outlook:

• Market Dynamics: The immediate focus will be on the market's interaction with the 4740-45 area, which will likely determine the short-term direction.

• Profit Strategy: Employ a level-to-level trading approach, ready to capitalize on either bullish continuation or bearish reversal, depending on how the market unfolds.

Disclosure: This is not financial advice and is for informational purposes only. Please consult a professional financial advisor before making any investment decision.