Daily Commentary: December 02, 2024

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Market Forecast For December

Posted by Pete Stolcers on December 02
www.oneoption.com

The market made a new all-time high Friday. Here’s what to expect the rest of the year.

PRE-OPEN MARKET COMMENTS MONDAY – I hope that all of you enjoyed your time off. In an abbreviated session Friday, the market made a new all-time high. I suggested last week that this was the most likely scenario and that risk favored the upside. No one wants to short when the market is at an all-time high and a breakout was likely to gain traction. This is a period of seasonal strength and Asset Managers like to “mark up” portfolios into year end.

When the rally gets over-extended, the candle bodies will be tiny and the momentum will slow. That is a sign of profit taking (resistance) and the volume will dry up. Asset Managers won’t chase, but they will buy dips. When the bid dries up, the market probes for support. The dips are brief and shallow and that confirms that buyers are still in control. Once support is established, we have a window of opportunity to buy. We are going through one of these cycles right now.

Two weeks ago we were adding to our bullish swing trades and selling OTM bullish put spreads. I told you that that might be our last chance to sell December spreads. I expect this move continue for the rest of the week, but not in a dramatic fashion. When the move higher starts to stall, we have to prepare for another dip.

Major economic releases are scheduled this week. After the open we will get ISM Manufacturing. JOLTS, ADP, the Beige Book, official PMIs, ISM Services and the Jobs Report will be released. I am expecting good news. Jobs will rebound from the dismal October reading. The storms have passed and the strikes have ended. If the numbers are “soft”, the Fed is ready to jump into action. This provides us with a safety net.

I am expecting another week of positive price action and then we are likely to go through another cycle where we test the bid. The dip will be brief and shallow and the market will finish the year at the high (or very close to it).

It’s important to have some swing trades on. The gap up Friday was hard to chase because of the light volume and the short session. By the time you had the price information you needed to day trade the move, it was almost over. If you don’t have some swing trades on, you will miss these little overnight gaps up. The intraday price action will be compressed and it will be hard to find opportunities. We have been adding during these dips for the last two months once support has been confirmed.

From a day trading standpoint, let’s see if the move from Friday holds. Overseas markets were up so there is a slight tailwind. Some of that could be in response to the US rally Friday. I would discourage chasing strength early in the day. Asset Managers won’t chase and I did not see any news over the weekend that would prompt them to do so. Official PMIs in Europe were inline, but in contraction territory. If we get an early surge higher… great. I would take gains on short-term swing trades. Your longer-term swing trades will benefit and we are not making any changes there. You have to be willing to let this move run without you. “FOMO Joe” will chase it. He missed the move Friday and he is ready to pile in. These are lofty levels and we should expect some profit taking. Let the market probe for support. If most of the gains from Friday hold, we can get long with confidence. If we see any long red candles in the first 30 minutes, we have to hold off on day trading longs. That could be a sign that the probe will be deeper and that it will last longer.

After a big day, the market tends to rest. The news will ramp up as the week unfolds and the action is likely to be dull today.

What does all of this BS mean? Our best scenario is a brief shallow pullback that runs its course in the first hour. We establish support and we get some consecutive greens off of it on good volume. Anything other pattern keeps us in passive mode.

Support is at $601 and resistance is at $605.30

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