S&P 500 E-Mini's Final Trading Day of the Year: Pullback Is Likely

Emini daily chart

• o    Today is the final trading day of the year.
• o    The S&P 500 Futures are beginning to stall above the December 20^th high and will probably begin to pull back over the next couple of days.
• o    The bulls see the March 2022, the high of last year, only 30 points away from the current price level. This magnet is close enough that the market will probably have to reach it soon.
• o    The problem the bulls face is that the rally that began in November is climactic and has been away from the moving average for 38 bars. This increases the probability that the market will have to pull back soon.
• o    The market may have to test the moving average before it reaches the March 2022 high.
• o    The December 20^th outside down bar was a surprise breakout and will likely let a second leg down. This means that bears may see the current rally above the December 20^th high as a pullback from the selloff.
• o    And the reversal down that we get could be quick. Just like what happened on December 20^th, if traders conclude that the market is overbought, more and more bulls will begin to sell out of longs, and bears will sell to go short.
• o    The past several bars have been 20 – 30 points in range. Therefore, some bulls may exit longs if the market goes 20-30 points below any bar, just in case the market sells off quickly. Other bulls may wait for a strong bear close to exit.
• o    As climactic as the rally is, the best the bears can expect is a trading range on the daily chart. This means there are probably buyers near the moving average willing to scale in lower.
  
  

Emini 5-minute chart and what to expect today

• o    Emini is down 4 points in the overnight Globex session.
• o    Because the daily chart is overbought, today has the potential to be a bear trend from the open.
• o    Traders should pay close attention to the week’s open (4,808.75). This week will be the ninth consecutive bull close on the weekly chart which is climactic behavior.
• o    It is worth mentioning that the week’s low is only three ticks below the week’s open. Most weekly chart bars have tails that are bigger than three ticks. This increases the risk of the market going below the open and low of the week.
• o    As I often say, traders should expect the open to have a lot of trading range price action. This means most traders should wait for the market to go sideways for the first 6-12 bars before placing a trade.
• o    Most traders should try to catch the opening swing that often begins before the end of the second hour after forming a double top/bottom or a wedge top/bottom.
• o    Today is the final day of the week, month, quarter, and year. This means that traders must be ready for anything. Traders must not beg in denial of the chart in front of them.
• o    Lastly, traders must be ready for anything, as today has the potential to have a surprise breakout.
• o    While the final day of the year can be a small range day, traders must be prepared for a possible surprise breakout late in the day, similar to what formed last year (see chart below).