ES review & plan
Yesterday remained within the wide range of Monday and failed to push into the regular trading hours gap from Friday's low and Monday's high. The late sell-off was very aggressive and in my eyes a big red flag for today for potentially sharper falls. Underlying volume remains high (5.2bn shares on NYSE) and the Vix closed at 36. Open interest in the September contract is up 10% in the past week.
It's still difficult to show the profile charts due to the ranges but the move lower yesterday left single and some double prints from 1909.75 down to the low at 1860.00, briefly testing Monday's single print range (1866.50-1831.00).
If the market starts to accept within the single print range from Monday, I believe the next downside target is the Oct '14 low followed by a flush through to the composite low volume 1760 area as shown on the chart above. If we do see strong buying interest step in if there's a push back down to the 1865-75 area, then we could have a wide value area range to trade. However, I'm going to be cautious taking any long trades as I have a short bias going into today.
The overnight range is 1850.50-1915.00 versus settlement at 1872.75. Durable Goods are due out at 7:30am ct.
The chart below shows we are back inside the 2nd standard deviation from the monthly VWAP (currently 1875.25) - a move back outside that is another red flag to add to the list for more downside.
Please feel free to drop me a line at giles@divergent-trading.com if you have any comments or criticisms, I'm always open to either.