Tuesday Prep

The week opened with a gap higher which steadily continued up to the close yesterday with little give back. Volume was fairly low at 1.2m contracts, especially considering the 29 point range over the whole session.

The daily chart below shows two areas the market is approaching which have a good chance of bringing in sellers, both from a long exit and short perspective. If that area holds this could offer a high reward to risk move for swing trades on a correction back towards the high volume area below. A move up through the CLVA would invalidate the short and put the all time highs back in focus (which i can’t believe I’m saying 3 months after December’s move!).

The hourly chart below shows the monthly volume profiles as well as the composite. The acceptance above last month’s high is clearly bullish (for now), though as mentioned above it’s running into potential higher time frame resistance. Price action remains bullish until proven otherwise, plus shorts being squeezed out can accelerate the move up (though this tends to leave weak structure).

Yesterday’s RTH profile below shows the magnitude of the gap and also the very mechanical way the market moved higher yesterday leaving potential for a cascade of stops to get triggered by recent longs if sellers step in.

Overnight so far the market has ranged between 2864.00-73.50 versus settlement at 2870.50. The split session profiles below show areas of interest today. In terms of potential scenarios today I’m considering most likely. As always, price action, volume, delta and market internals together with order flow give context to any of these:

  • a squeeze higher into the 75-80 zone where sellers step in and we see some long liquidation and consolidation

  • a test of yesterday’s high and fail followed by liquidation and test of yesterday’s low and potentially the gap.

  • a squeeze higher which brings in more strong buying through the 75-80 zone and trends higher