Friday Prep
The market opened at 47.50 after trending higher overnight from the 35.25 low. This was an area sellers had defended the previous day and buyers failed to break, as seen in the triple TPO top. Momentum wasn't supportive on the break of the overnight high and we got a long liquidation break and failure at the initial support zone. Trade then ranged between the bull/bear and initial resistance zones, with value building below the prior day's.
There's still an open gap in RTH which I'd expect to fill at some point when the bull/bear zone fails. For now it has held and 58.00-60.50 is the next key zone to test above, which includes the breakdown area and open from last Thursday. For that rally we'd need to see a rejection of yesterday's value after the open or else there's potential for a rotation lower if it can't hold above prior value.
Overnight so far the range is 2437.50-45.50 versus settlement at 40.75.
The weekly volume profile with today's zones below shows value built above the bull/bear zone, which keeps the bias neutral/bullish, as it is still within a larger range. If we do see broad market strength, size and momentum on a rally then I would see the 63.25-64.25 zone as a potential upside target extreme today, though still looking for sellers response at the zones below there.
On the downside, acceptance below 35 means a possible shift in sentiment and we could see a heavy liquidation break depending on market state.
Thursday Prep
Opening at the overnight low, there was a brief look below and rejection. We then got slow and low confidence moves higher, churning back and forward until hitting a wall of passive sellers into the 46.50-47.75 area which halted the advance. The NYSE advance/decline had trended higher from -1000 up to nearly +600, which was a supportive factor in continuation higher but order flow was clearly not supportive in the ES futures.
The triple TPO poor high on the profile above will be a spot buyers are likely to attempt to break going forward.
Volume was low at 1.2m contracts and settlement was at 2441.50, down 11.25
Overnight so far we've seen a move lower back down to test the bull/bear zone, which found buyers. Bias remains neutral/bullish above that zone but still expecting sellers to be active at the resistance zones on first test. Will be closely watching order flow and underlying market internals for better clues in real time.
Today's zones:
Wednesday Prep
Yesterday's overnight range had balanced between the prior day VPOC and the bull/bear zone. After the bell we saw an opening drive straight through this zone, leaving a 28 tick buying tail on the profile which is indicative of forcing action i.e. short squeeze. I would expect to see this area re-tested in the next day or so, possibly down to the overnight high at 37.25.
Volume was fairly light at 1.3m and the underlying market internals were not as strong as the price action suggested. As shorts were squeezed out pushing prices higher this didn't translate to particularly strong buying in the cash market, considering it was a trend day.
The market settled at 2452.75, +24.75 points. The squeeze may continue but it has left poorly auctioned areas and air pockets in it's wake.
Overnight so far the market has pulled back after a quick look above and fail of yesterday's high. The current range is 2445.25-54.75. My main expectation of today is that we balance inside yesterday's range., filling in the anomalies from yesterday's profile. We could see a return of the uptrend and break higher to test the 58.00-60.50 resistance zone if a test lower can't hold below yesterday's RTH mid (43.50).
Zones I'm using for today are below.
Initial Support 42.75-43.50 & Initial Resistance 50.00-51.50
Tuesday Prep
We saw a reaction at initial support after the open and briefly tested higher to a tick below the prior open, then an aggressive push lower through the prior poor low, down to the composite low volume area (CLVA).
That area should have been used as front of the next support zone which was a bad miss on the prep. However, once back inside the IS zone it ranged between the IR and IS then back to IR into the close. I noticed large size trading into the 24 area around lunchtime, so an area to watch if we revisit. Overall volume was much lower though at 1.3m compared with over 2m on the prior two days.
Overnight so far the range is 2427.75-37.25 versus settlement at 28.00 (trading between the prior IR zone and the bull/bear zone).
Today's zones below are shown with a merged market & volume profile of trade following the sell-off. If the market fails to hold above 35-37 then I would expect rotation lower.
27.50-29.75 is the more aggressive area of initial support, then would look for the 23.50-25.25 zone to hold on first test if buyers are to stand a chance of regaining dominance. Below there we could see selling accelerate to try and re-test yesterday's low though will be looking for a buyers response at 17.75-18.50 if we get there.
Above the bull/bear I'd expect initial reaction at the 39.50-40.75 zone, and above there the anomalies from last week would be repaired at the next two zones.
Overnight & RTH split sessions
Monday Prep
Friday opened below the prior day low though the underlying market internals were not overly weak. Once the first hour range had been broken we saw a balance breakout, trapping shorts in the prior day's range until better sell response stepped in. During 'I' period above, the one timeframing higher stopped at a time when there were still single prints at 28-28.50 left from the breakout and VPOC still at 25.00. A poor low was left at 19.50 on the day.
Overnight so far the range is 2419.75-31.50, versus settlement at 26.75.
Zones for today below:
Short term bull/bear: 35.00-37.00
Initial Support: 20.50-22.50 Initial Resistance: 27.75-30.25
Bias: neutral/bearish
Friday Prep
From yesterday's prep: 'A lack of buying interest could see a break lower again, possibly to retest the high volume 35/36 area. The contraction in daily ranges over the past few days may continue for now, but looking for a decent move soon and a sell-off is likely to be jumped on by hedge funds in my view.'
The range and volume distribution of yesterday's overnight market was overlapping below the prior two days and had breached below the bull/bear zone I had at 61.50-64.00. Opening below there was a caution on any longs and the RTH high ended up at the top of that zone.
A random tweet regarding a rumour that Gary Cohn had resigned from his post sparked enough downward momentum to bring in more sellers, even after the rumour was discredited. The last hour was particularly bearish seeing very negative TICK and A/D readings, and a shift of the VPOC down to 2429.75 after slicing through the composite high volume area (CHVA) and weak low shown in the chart above.
Overnight the range is currently 2424.25-30.75 versus settlement at 29.50.
Yesterday's profile has many anomalies left in it which have a high chance of being revisited. However, the pressure remains on the downside for now and my main expectation for RTH today is to balance at lower prices, probably overlapping below yesterday's range. I wouldn't expect to see any advance beyond yesterday's mid point on the upside if shorts get squeezed, and on the downside I see potential for a move down to the 2400 area if the market can't break the 33-34 resistance zone. As always, context is key and a close watch of market internals and order flow in conjunction with price action and value development is needed.
Zones below for today (overnight bull/bear zone 29.50-30.50)
Thursday Prep
From yesterday's prep: 'My main expectation is for sellers to step in at the 73.00-74.75 IR zone and for trade to churn between the IR zone and the short term bull/bear zone (61.50-64.00) ahead of the FOMC minutes later today. We may not see any directional conviction until either of those zones is broken with sustained momentum, volume and market breadth.'
We did end up reacting at both zones; the first two at IR were accompanied by weak TICK momentum, supporting a fade of the zone. The move down into the micro bull/bear zone was after the minutes. TICK momentum was negative but not overly so. Also, the advance/decline was sitting steady & positively around +600 which didn't support continuation of the down move.
The market profile above shows how there was a break either side of the initial balance. When there is a wide POC in the middle of the IB and both sides are broken, the chance is greater that price moves back towards that POC as we saw into the close. The FOMC minutes failed to ignite a move through either zone, so for now price remains within this composite high volume area.
Overnight so far the market has remained in the bottom half of yesterdays range and has been trying to press lower, though holding yesterday's RTH low currently. The zones remain the same as yesterday, though clearly the more times a zone gets tested, the weaker it gets. The current pace of the summer market requires even more patience than normal.
The daily chart below includes monthly volume profiles plus the composite. The monthly trend remains bullish, however, the daily moves have now flattened the upwardly trending 20 day sma and it is holding below it after failing to push above the edge of the upper volume distribution. A move through yesterday's high with enough strength will put the squeeze on shorts and make a challenge for the high again. A lack of buying interest could see a break lower again, possibly to retest the high volume 35/36 area. The contraction in daily ranges over the past few days may continue for now, but looking for a decent move soon and a sell-off is likely to be jumped on by hedge funds in my view. A squeeze to the upside I see petering out with low volume. We shall see!
Zones for today:
Wednesday Prep
A slow, low volume session balancing at higher prices within initial support but failing to re-test the overnight high. The 60.50-61.50 IS zone was tested several times with underlying stock momentum and breadth weak, but it still managed to hold.
Settlement was at 2463.75, 1 tick above the RTH VPOC
Overnight so far the market has squeezed higher, with a range currently of 2461.50-71.25, and moving higher. My main expectation is for sellers to step in at the 73.00-74.75 IR zone and for trade to churn between the IR zone and the short term bull/bear zone (61.50-64.00) ahead of the FOMC minutes later today. We may not see any directional conviction until either of those zones is broken with sustained momentum, volume and market breadth.
Zones for today:
Tuesday Prep
The 'gap and trap' move yesterday left a classic P shaped profile, associated with a short squeeze. Internals stayed bullish for most of the session. As stated in the prep, the 60.50-61.50 zone was a key area for sellers to defend or risk a squeeze higher to the breakdown points from last week.
Buyers remained dominant and responded on a retest from above of the 61 area. That stays a key area for the day ahead.
Overnight the move has continued higher as shorts continue to get trapped and squeezed. The range is currently 2462.50-73.25. The IR/IS zones may contain trade today as this is within a composite high volume area. However, if either breaks it could give directional conviction to a move depending on underlying internals.
IR zone: 2473.00-74.75
IS zone: 2460.50-62.50