Midweek Mayhem 🚨: We Couldn’t Wait 'Til Friday 🎉

Welcome to The Trading Brief’s first ever midweek newsletter! This one will be real brief, so hold on tight and enjoy!

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Table of Contents

1. Scalping v Swing Trading

2. Prop Firm Deals

3. Important Data Events

MARKET UPDATE
What’s Ahead for the Rest of the Week

As we hit the midweek mark, futures traders are juggling two major events: the highly anticipated Federal Reserve meeting on Wednesday and the quarterly contract rollover. Both of these can significantly impact volume, volatility, and market sentiment, making it a pivotal time for the futures market. Let’s break it down.

The Fed Meeting: All Eyes on Policy

On Wednesday, the Federal Reserve will release its latest policy statement, followed by Fed Chair Jerome Powell’s press conference. While the market has already priced in most expectations for rates to remain unchanged, traders will scrutinize every word from Powell for clues about future policy direction.

What to Watch:

• Inflation Commentary: With inflation showing signs of stickiness in recent months, any shift in the Fed’s tone about rate hikes or easing will move markets.

• Economic Projections: Traders will look for updates to the Fed’s economic outlook. Growth forecasts, employment data, and inflation expectations could provide signals for what’s ahead.

• Rate Path Clues: Even a hint about potential rate cuts (or lack thereof) can swing futures in the equity, bond, and currency markets.

Fed days often bring short-term volatility, particularly as traders react to the release itself and Powell’s remarks in real time. Expect volume to pick up sharply during the announcement and presser, with knee-jerk moves potentially reversing quickly.

Contract Rollover: Shifting Volume, Shifting Dynamics

This week also marks the quarterly contract rollover, where traders move from the current front-month futures contract to the next. For equity index futures like the S&P 500 (ES), Nasdaq (NQ), and Dow (YM), contracts officially expire on Friday (the third Friday of the month). However, most of the volume begins rolling over by Wednesday and Thursday.

Why Rollover Matters:

• Volume Migration: As traders close positions in the expiring contract and reopen them in the next, volume in the front-month contract drops, and liquidity shifts. This can create temporary price dislocations.

• Volatility Spikes: The combination of large institutional rollovers and low liquidity in the soon-to-expire contract can lead to erratic price movements. Short-term traders need to stay nimble.

• The ‘Rollover Effect’: Some traders take advantage of these movements, while others prefer to stay sidelined until the dust settles.

It’s worth noting that rollover activity can amplify moves already triggered by external events—like, for instance, the Fed meeting happening this same week. Traders should keep a close eye on volume levels to identify where liquidity is shifting and how that might impact price action.

Key Takeaways for the Week:

1. Fed Decision = Volatility: Expect market swings during the announcement and Powell’s press conference. Stay alert for any subtle policy shifts.

2. Rollover Activity = Volume Shuffle: Watch for liquidity to move to the next contract by Wednesday or Thursday, creating temporary volatility.

3. Be Cautious, Be Strategic: Combining a Fed meeting with rollover week can be a recipe for erratic moves. Trade with clear levels in mind and recognize that volume dynamics might distort the market temporarily.

As the week unfolds, futures traders will need to remain disciplined and adaptable. Between Powell’s remarks and contract rollovers, this midweek stretch could set the tone for broader market trends into next week.

Pro Tip: If you’re unsure about the rollover schedule, most trading platforms will highlight which contracts are most active. Keep an eye on volume—it’s your best signal for where the market’s attention is shifting.

PROPRIETARY FIRMS
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EVENTS
Important Data Events - Week 51

These are some market moving events that are occurring this week, take a quick screenshot of this list and set reminders as markets can get volatile during these times.

Wednesday, December 18th

Thursday, December 19th

Friday, December 20th