Wednesday Prep

The lack of downside pressure after the open saw a wide and fast first half hour (nearly 40 point range). This move was a bit too far, too fast and price action was poor for several hours until buyers regained dominance in the afternoon, pushing to close near the high.

Overnight has kept the upside momentum with the range currently 2682.00-2714.00 versus settle at 2685.50. At current price the market is looking to open on a large gap of approximately 20 points. This will add to pressure on short positions from the last few days and could cause a rapid squeeze in price (next target 2728 CHVN). Whether we see an early attempt to close the gap or just a fast move higher will help determine what type of day we’re likely to see. The least likely expectation is to start trading back inside yesterday’s range, but if that occurs all longs from overnight are offside. Zones of interest for today below:

Tuesday Prep

The early failed breakout above the prior day’s range saw a complete reversal of the overnight move and once below the overnight low things accelerated on the downside with about a 60 point drop followed by a 40 point bounce over the last hour and a half. The extreme TICK readings on the downside indicated some aggressive liquidation going on.

The strong buying tail left on the day will be a useful guide today as if this is going to be an intermediate swing low I’d expect that tail to hold. Therefore I’m using the 2624-28 area as a short term bull/bear zone.

The market overnight has so far ranged between 2636.25-64.25 versus settle at 43.50. If the market can hold above yesterday’s settle then there’s scope to reverse yesterday’s move and squeeze shorts. Zones I’m watching today below:

Monday Prep

Friday ended up a fairly balanced session within a wide range. The push lower into the 25.50-29.75 zone saw selling dry up and there was a 65 point reversal over the next two hours.

Overnight the market has been strong, led by European indices. The range is 2660.00-2700.75 versus settle at 2669.50.

If prices can hold above Friday’s high then the next major target is the 2728.00 CHVN. Failure to do that would put Friday’s settlement and vpoc as immediate targets below.

Friday Prep

Yesterday’s open tried to move price back to settlement but underlying stock momentum was positive and the down move was short lived. The rally cleared the overnight high and found support there before an attempted move back to the 2728 CHVN. The move fell short of there and had a fast liquidation drop into the close. The after hours results from AMZN and GOOG have led the weakness overnight with nearly an 80 point range from last night’s high to the overnight low.

The overnight range is currently 2690.00-2646.00 on above average volume. The move below Wednesday’s lows is going to be an important pivotal area today . Acceptance below there keeps the pressure on the downside. We've not really seen any panic selling yet and we may not until the February lows get taken out. That’s still around 100 points below here which could easily be done in a day or two at current volatility. At that point if there’s no follow through below the Feb lows there’s room for some very aggressive rallies. In the meantime, a lack of downside momentum is likely to see buyers try to move back to the 2728 CHVN.

Keeping a close eye on NQ today as likely to be in the driving seat as AMZN is roughly -10% pre-mkt.

It’s the lack of downside follow through and momentum that can enable the big turnaround moves. However, in the absence of any majorly positive news today the main expectation is for sellers to step in on rallies and try to hold below Wednesday’s low.

Today’s zones of interest:

Thursday Prep

The caution going into yesterday was whether or not a move back to the CHVN at 2728.00 would either find support or fail and potentially trigger a liquidation move. The eventual break of the prior day’s low on the second attempt (after bouncing to the vpoc on the first try), really accelerated the move, dropping about 40 points in the last hour.

Overnight so far the range is 2658.75-92.50 versus settle at 64.25. The overnight high is at an important area for bulls to push through if there’s going to be any chance of a reversal. Failing to break that could leave the market balancing in the lower half of yesterday’s range or try to extend lower. The after market earnings today from AMZN & GOOG and how the Nasdaq responds ahead of that are going to be hugely influential later in the day particularly.

My main expectation is for some consolidation in the bottom half of yesterday’s range with an attempt to test the lows. A failed breakdown could lead to a very aggressive short covering rally, as could a hold above the overnight high could target the 2728.00 CHVN. Any breaks lower are going to need broad market participation and momentum to be sustained.

Zones of interest today:

Wednesday Prep

A quick look at the monthly, weekly and daily charts above puts things into context and as we can see from yesterday’s move on the daily, the market tested the lowest volume area at the bottom of the major volume distribution on the composite profile.

Yesterday’s open at 2715.50 was a 41 point gap below the prior settle. In yesterday’s note I stated: If there’s an early move back to the overnight vwap in the first hour, it could be telling whether that holds or not to the ongoing action. The 24 hr vwap was at 2723.25 at the open and the initial move higher stalled and reversed at the vwap to make the eventual lows on the day. The heavily short and extended move got aggressively bought for the rest of the session and eventually closed the range gap from Monday. Volume was heavy at 2.8m contracts.

Overnight so far the range is 2719.25-50.00 versus settle at 2746.25. The in-range composite high volume node (CHVN) is at 2728.00 which could become a magnet on a failed move higher towards the 2750-52 CLVA. Pushing through and holding above 52 puts 71 as next target. Failure for 2728 to hold puts yesterday’s reversal into question and could trigger a liquidation move lower.

Zones of interest for today below:

zones.PNG

Tuesday Prep

A weak day overall with a initial failed move higher after the open. Value was lower on the day with the 2760.25 vpoc forming below the prior day low and a poor low left at 2751.00. Price action was messy for much of the session and neither the overnight high or low was breached, which is unusual.

Overnight saw heavy selling across Asia, which has driven European markets lower. The ES range is currently 2757.50-2714.25, with the bulk of trade in the lower half of the range. Last week’s low was 2745.25 and the October low from the 11th is 2712.25. Clearly the market is very short relative to last night’s close and susceptible to a squeeze higher on positive news. Sentiment is negative though and my main expectation is for rallies to be sold if they happen.

Zones of interest for today are below. The 2711.75-14.50 zone is the intermediate bull/bear as a close below there could trigger much more selling. Currently the market would be opening on roughly a 35 point gap lower to last night’s settle at 2756.50. If there’s an early move back to the overnight vwap in the first hour, it could be telling whether that holds or not to the ongoing action.

On the composite volume profile the nearby high volume area is around 2728-34, so any absence of further breakdown or complete reversal could see prices continue to consolidate in that area.

Monday Prep

We got an inside day on Friday following a failed attempt higher early on. Volume has been consolidating around the last two weeks HVN at 2773.00.

Overnight the range is 2749.75-82.00 versus settlement at 2767.50. I’m expecting buyers to hold the 71-73 zone if there’s to be any meaningful rally today or the market may continue to rotate back and forth again. Until sellers can take out last week’s low then my main expectation is for buyers to step in on dips. A push higher could accelerate as buy stops get triggered following the last couple of days action. Momentum and broad market strength are needed for continuation or we may see failed attempts.

Friday Prep

With the move and hold below the overnight low early on it looked like we were in for further downside, though the break higher after the first hour tried to change that but had little upside momentum behind it or broad market strength. When that move failed, the reversal back below the overnight low gathered pace targeting the prior day low and breakout point mentioned as being pivotal in yesterday’s note. The acceleration lower moved into the centre of the recent balance broken out of and lacked the late afternoon selling drives we saw last week.

Going into today, the overnight range is relatively narrow at 2771.00-86.50 versus settle at 2772.25. Yesterday’s VPOC at 2771.00 is also the overnight low. Expecting fairly neutral activity until either the overnight high or low is breached and held above/below.

Zones of interest today:

Thursday Prep

Opening inside the 2810.50-13 zone yesterday, there was a quick tag of the prior vpoc and prices shot lower with underlying stock weakness (see NYSE TICK & Advance/Decline above). The ‘back & fill’ of the prior day’s single prints completed in the first 90 mins stopping to the tick at the prior day initial balance high, where the big breakout started. The dip buyers and short covering managed to rally price back to settlement before a choppy wait ahead of the FOMC minutes then some 20 point swings into the close. The potential for breaking out above the 17.75-19.75 zone looked limited because of the still quite negative A/D.

Overnight so far the range is 2800.25-17.50, within yesterday’s afternoon range and versus settle at 2816.25. Short term remains range bound following an upside breakout after a much bigger selloff. The breakout gets invalidated for me if prices hold below yesterday’s low and then we could see a move towards the recent lows. Until that happens we either remain in this breakout range and/or attempt to push and squeeze higher.

Zones I’m watching today on the split overnight/RTH profiles: