Sunday Setups - 12/29

Happy Sunday,

To make your Monday more enjoyable, we’ve prepared some Fresh Trade Ideas for you. They go nicely with a freshly squeezed glass of lemonade!

What is the Sunday Setup?

It’s a short review of the market, trades from last week and a detailed overview of trade ideas for this week. Build your trading strategy for the week in the time it takes to finish a glass of lemonade.

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Alright, is that sugar kicking in? Let’s find some edge!

Market Review

Before we dive in to the individual trades that I am looking to take, I want to do a quick review of where the markets stand. Understanding the overall market trend will help guide us with how we approach these trades and position size.

Last week’s holiday-shortened schedule delivered a bit of a Santa Claus rally, though it ran on fumes when it came to volume. Prices stalled out at the 78.6% retracement level around $6100 in the futures, and sold off from there.

With many institutional players seemingly on vacation, the S&P 500 (SPX) still managed to close above its 34-day EMA on Friday—an encouraging sign of support. The /ES closed near it’s 21 EMA on the daily.

A few key levels are on the radar as we head toward year-end.

First, there’s a sizable SPX options position (the so-called “JPMorgan collar”) set to expire on December 31st at the 6055 strike, which can act like a price magnet or ceiling. On top of that, the SPX is bumping against the 78.6% Fibonacci retracement near 6,042. A daily close above this zone could spark fresh upside momentum into the final trading days of 2024, but I would look at 6055 as resistance into the end of year.

Meanwhile, the Nasdaq (/NQ) continues to show relative strength, with its 8, 21, and 34 EMAs neatly stacked in a bullish formation and prices closing near the 8 EMA.

Looking ahead, we might see a bit more upside as portfolios rebalance for the new year.

But keep an eye on a few risk signals that might signal a larger pullback in the next few weeks…

First, the US Dollar Index (DXY) is back on the rise, breaking out of the range it has been in for the past two years. This can put pressure on equities.

Second, bond yields are ticking higher (which can ding valuations).

And finally, that stubbornly bearish put/call ratio suggests lingering caution.

Bottom line? The market’s holding up and continues to show a bullish pattern, but 2025 could bring a dose of volatility, if these warning signs come to fruition. I think we may see some light strength before a larger pullback down to the weekly 21 EMAs on the indices.

Stay nimble, keep position size smaller, and continue to focus on strong names with good patterns and setups.

Happy New Year everyone!

Ok, here’s what I’m trading this week.

This week’s Trade Ideas

1.) CYBR  Long

Reasoning:

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