Tuesday Prep

Opening yesterday on the overnight lows, there was an initial attempt lower but a lack of underlying momentum in stocks curtailed the move. A rally higher just fell short of Friday’s settlement before sellers dominated and we saw a sharp drop which cut through September’s low. One of the things mentioned yesterday was: ‘There needs to be broad market participation and momentum to the downside to bring in more sellers below last month’s low or else longer time frame buyers may attempt to reverse price action off/within the 69.50-72.50 zone.’

Trade was then very choppy for a couple of hours after the drop, building volume around the then intraday vpoc at 2871 (September’s low was 2870.50). Note a climb in the cumulative delta after midday from not overly negative levels. The reversal was aggressive due to short covering from stops above the lower balance area, and there was a shift in vpoc up to 2889.75.

Overnight so far has sold off with the range currently 2874.50-2894.25 (overnight high 1 tick failure above yesterday’s high). The dollar strength continues and the euro is weaker as the BTP-Bund spread continues to widen after the Italian finance minister failed to steady perceptions.

I’m using 2893.00-95.00 as a short term bull-bear zone and includes the January high (back-adjusted) at 2894.50. Trade could remain two sided between there and the 70.50-71.50 zone but below there could get some heavy selling stepping in. Currently it’s testing the afternoon breakout area from yesterday which I've made the 74.50-76.50 zone for today. Zone for today below: