ES review & plan

The market was short overnight and there was some inventory correction going into the open. The brief move higher reversed at the prior settlement and the break lower was accelerated by emotionally driven selling on the back of news reports regarding the capture of a US boat by Iran in the Straits of Hormuz. As is often the case with a fast liquidation move, the resulting bounce can be equally aggressive. One thing you can rely on with headline grabbing news algos  is an over-reaction more often than not as other momentum driven systems get triggered, and then find responsive activity to bring things back into balance. 

Value was left slightly overlapping lower leaving a long buying tail between 2088.25-2093.50. Acceptance back in that zone would be bearish. The late move higher yesterday broke back into the upper distribution from Monday, above the pullback highs where shorts would be trapped and the prominent POC/VPOC from Friday at 2011.50.

Volume was 1.4m contracts and 3.5bn shares traded on NYSE.

Overnight the range has been 2106.00-2112.50 versus settlement at 2112.00. GDP for Q1 is released at 7.30am ct and Pending Home Sales Index at  9am ct. The FOMC statement is released at 1pm ct which will be closely watched for it's forward guidance, as the market is currently far more dovish in it's pricing than the Fed's dots forecasts are implying. Any hint that rates could move up in June or is generally more hawkish would likely see a major sell-off in STIRs, notes and bonds, stocks & gold and a rally in the US$. 

The 2087.50-89.25 zone was tested again yesterday. If there is a strong sell-off following the Fed announcement, the odds of this holding again are reduced and the 2081.75-83.75, 2072.50-74.50 then 2064.50-67.00 zones come into play. Acceptance above the overnight high puts new highs back on target and the next major measured move at 2125.25 (161.8% ext. retracement of Sep '14 high to Oct '14 low).

We're likely to see two-sided trade ahead of the Fed announcement, barring any major GDP shocks, with the support (green) and resistance (red) zones where we could see responsive activity, in line with context and market internals.  Notes and Bonds have continued their sell-off overnight.