As Santa’s little helpers prepare for another festive season, the traditional Xmas rally is already underway with both the Chinese and the Europeans providing some early cheer, helping to propel equity markets higher and back to mid summer levels, with the correction of late August now but a dim and distant memory. Regular readers of course will be aware of my thoughts on the ‘big short’ that never was, and indeed the day after after the dramatic fall on the 24th August I suggested this was merely a long overdue correction, a view based on two things. First, the move lower had not been preceded by a selling climax, and second the signficant levels of volume associated with the price action of the 24th August clearly signalled only one thing – initial stopping volume. Since then we have seen an expected phase of price congestion with further selling pressure duly absorbed, with a consequent breakaway and move to test the highs of mid summer once again.
For US markets what is particularly interesting at present is the resumption of a characteristic we saw earlier in the year, with the NQ Emini leading the way for the other more illustrious indices. Indeed, Friday’s price action for the NQ propelled the index through the upper ceiling of resistance in the 4550 region, denoted with the pink dotted line on the daily chart, before closing the week at 4611.50 on strong and rising volume. Whilst other markets such as the YM and ES indices still have a region of congestion to negotiate, the NQ has already cleared this particular technical hurdle and is now preparing to take out the high of July at 4677.50. With volume confirming the strength of the current move higher, and with the volume point of control now well below, the index looks set to drive higher with a solid platform of support now in place below. For the other major indices, they still have to clear some deep price congestion overhead, but for the NQ emini, the way ahead is now clear, and given the NQ has resumed its leadership role, where this index goes so the others will duly follow.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading