Thursday Prep
Going into yesterday I mentioned in the prep that: Clearly the more the 60.50-62.25 zone (IS) gets hit the weaker it becomes and the more likely we see the market auction down through to the other side of the current range, though I would still be looking for reactions at the lower zones (dependent on market state/context). We ended up seeing that unfold with very negative market internals early on, which was a warning sign to not try catching every falling knife.
The move down to the other side of the range, clearer on the hourly continuous chart, shows a head and shoulders pattern in technical analysis terms. The break of the initial support zone (see bottom chart) was accompanied by very weak stock momentum. Broken support becomes resistance until proved otherwise. This effectively was a balance breakdown trapping short term longs from the prior few days.
The test of the 42.00-44.25 range support zone was the only valid area to get long in the face of such weak internals in the morning. This gave the best expectancy outcome being a first test of the range. The shift of momentum in the afternoon and acceptance back above the mid and vwap were warnings not to fade the rally. If the sell-off had been meaningful it's much less likely to see a move above those areas.
Overnight the range is so far 2556.25-63.25 versus settlement at 58.50. The ECB has kept rates at 0% and will continue QE at €30 (half the current rate) for the first 9 months of 2018. So far bonds and equities have reacted positively to the news. 2563.50 is the VPOC of the current week.
The market's now trading in the middle of the range of the past week, so we're in neutral territory within a longer term bullish trend. Zones of interest for today are below.
Wednesday Prep
Yesterday opened at 2567.50 and briefly touched the front of the B/B zone before moving down to test the prior settlement and vpoc at 63.50. There was no follow though and a poor low was left followed by a squeeze up to the top of the B/B zone. Underlying stock momentum was weak, however, and again there was no follow through to the upside this time.
Overnight so far the market has tested the bottom of the 60.50-62.25 zone with the current range 60.50-67.00 versus settlement at 67.25.
Yields have jumped across the treasury curve overnight with a bounce in the dollar and some key technical levels being breached.
I've kept the zones the same as yesterday. Clearly the more the 60.50-62.25 zone (IS) gets hit the weaker it becomes and the more likely we see the market auction down through to the other side of the current range, though I would still be looking for reactions at the lower zones (dependent on market state/context).
If IS holds we may just see balancing again between there and the B/B until one side can dominate. Above the B/B we have zones where sellers are likely to step in, though against the larger trend. We also have an all time high made in the electronic trading hours (ETH) which has always previously been tested during regular trading hours (RTH)
There is poor structure below the swing low at 42.50 from last Thursday down to the 2507.75-09.75 breakout zone, so in the event of a move holding below 42.50 things could get ugly fast for longs (not that i'm expecting that today, but that's the point, it's when you least expect it sometimes).
Tuesday Prep
Yesterday opened at 2576.75, a fresh all time high for the RTH but 2 ticks short of the overnight high. Higher prices were rejected immediately and we saw a slow and steady sell-off. The move down into the bull/bear zone (69.00-70.25) was after breaking the initial balance low and overnight low which was a heads up to be cautious on longs. Breaking below the bull/bear zone saw it retested from below and then accelerate towards the open gap zone (60.50-62.25). Market internals remained moderately negative throughout, and we saw balance breakdowns in the NQ and TF also.
Volume was 1.2m contracts and settlement was at 2563.50, which was also the VPOC on the day.
So far overnight the range is 61.50-67.50, just testing below yesterday's range. The zones remain pretty much the same today. Longer time frames remain bullish but short term is neutral after yesterday's action and I'd expect to see sellers try to defend the 69.00-70.25 bull/bear zone and attempt to push below yesterdays range into the 54.25-55.25 zone where we could see buyers step in.
Above the B/B, I'd also look for sellers to step in at the 71.75-72.50 zone, though a failure for that to hold would indicate that the march higher isn't over yet.
Headline risk remains high as we could hear Trump's new Fed chair pick at anytime.
Monday Prep
Friday opened at 2569.00, leaving a gap above Wednesday's all time high. Again, this leaves shorts trapped and forced to cover, although the climb up was fairly steady before an afternoon break back to the VWAP and LVN splitting the double distribution at 69.75 and then rally to 74.50 (being 161.8% of the Weds high to Thurs overnight low) - from Friday's prep: The 74.25-74.75 zone is not hard resistance, but a measured move and potential upside I see today.
The gap left below Friday's range is going to be a test of this market's short term strength. I'm using a short term bull/bear zone at 69.00-70.25 (Friday's open, LVN, afternoon pullback low and mid within that zone). A break below there has a poor low from Friday to target initially and, depending on the strength of any move, potential for a bigger liquidation break. There's still no hard resistance above and broken support zones become resistance potential.
Friday Prep
Yesterday's overnight liquidation break trapped recent short term longs who'd been trailing the slow and steady move up. It appeared to be a big move because of the relative ranges we've had recently, but the drop was insignificant in percentage terms and the move into the 2542.00-43.00 support zone (see last prep) saw selling abate and buyers step in. The composite HVN at 2549.00 became a pivot to rotate around before buyers initiated a move back up to take out the overnight high at the close.
If yesterday's blip was actually to be believed we would've seen far more negative readings in underlying stock momentum via the NYSE TICK. The NYSE A/D was going to open at a low level anyway due to the fact it's based on the prior day's close, but it actually began trending higher after the first 45 mins or so.
The yellow box in the profile chart below highlights the poor high that lasted through late morning before finally breaking out to close the range and settlement gap.
Overnight so far, we've seen shorts annihilated once again as the market proceeded to blast through the all time high again taking buy stops with it and accelerating the move. It's so important to detach what you think should be happening and how apparently insane this market is starting to look, from what is actually happening, how other participants are likely positioned or where they want to be positioned based on multiple time frames and ranges.
The range overnight currently is 2559.50-71.75 versus settlement at 2560.50 and the regular hours ATH at 2562.00 (62.25 Globex). If buyers are going to dominate today then I would expect the 60.50-62.25 zone to hold before continuation higher. The 74.25-74.75 zone is not hard resistance, but a measured move and potential upside I see today.
If we start accepting back below 60.50 then I'd still look for responsive buying at the two zones below. If it starts trading below 50.25 (yesterday's open) then sentiment has likely turned heavily and there may be a retest of yesterday's low.
Tuesday Prep
The past couple of trading days have continued in a very similar way to the prior week with daily value moving higher. There was a double distribution left in yesterday's profile, split between an LVN at the opening price of 2554.75. The market so far overnight is mainly holding above that, with a range of just 54.25-57.00.
On the right hand side of the chart above you can see the composite volume profile, which clearly shows 2549.00 as the most traded price up here. This would be a 'first stop' level on any break. If there is a break and the market powers through that point, that's giving a clue that sellers are a lot more dominant.
Today's zones of interest are below. As stated last week, I'm preferring to wait for better trade location opportunities in ES which is going to take more patience than usual it would appear!
Thursday Prep
There were no market surprises in the Fed minutes and a very low 800k contracts pushed 1 tick above the prior day's high. There was very little underlying selling momentum all day, as seen in the TICK. What could've been an intermittent high from the prior day's selling tail has now been negated and daily value continues to shift higher.
The day finished with the VPOC up at 2553.00 and a weak high is now left on the daily profile.
Overnight so far the range is 2552.50-47.25, and trying to move lower. As the combined profile chart from Oct 5th-10th below shows, under 2549.00 is where the market has spent most time and volume over the past week and the area between 44.25-50.25 could be rotational.
I'm happy to sit on my hands until we see better trade location opportunities. There's some overnight resistance at the 50.25-51.75 zone and above there is yesterday's VPOC and weak high at the 53.00-53.50 zone with no hard resistance above, just measured potential moves.
I'd be looking for signs of responsive buying at the green zones shown with 44.25-45.50 initial support
Wednesday Prep
The market opened again at the CHVN, 2549.00. After the first few minutes of pushing against this area there was a fast squeeze through there to new all time highs and hitting the 53.25-53.75 zone (127.2% ext. fib of recent daily swing).
There was little underlying follow through after the buy stops had been triggered and the market collapsed on itself, more from a lack of buyers than heavy underlying selling. This move tested the 42.75-44.00 zone (which represented 1 tick below the overnight low to the prior initial balance low). The second test of the zone showed a 1 tick failure of the overnight low and initial balance low which then trapped shorts and eventually led to a move back to the CHVN at 49.00.
The fact that many of these levels are being responded to so much at the moment is indicative of short term players dominating. Volume finished at 1.1m contracts.
The daily profile from yesterday now shows we have excess at the all time high and a series of poor lows and untested VPOCs/POCs. Although the long term bias is still clearly bullish, the risks are increasing of a correction. The downside target for that move would be the 2509.50 breakout point from the end of Sept. However, depending on the strength of any move we are still looking to see responsive buying at the zones ahead of that. This will be market state/context dependent. The FOMC minutes later today and data for the rest of this week are important for market sentiment.
Yesterday's stock moves showed defensives leading the day - not a great sign at an all time high.
Today's zones of interest:
Tuesday Prep
Yesterday's Columbus Day bank holiday volume was unsurprisingly light at just 735k. The market opened at the 2549.00 mentioned in yesterday's prep: A composite high volume node (CHVN) has formed at 2549.00 which may end up being pivotal for direction if that continues to build.
The initial negative price action after the open broke just below initial support and then remained in that zone for most the session until a late liquidation break into the 38.75-39.75 support zone. A prominent POC and VPOC had already formed before that drop, reducing the chance of continuation lower, particularly with overall volume so low. This zone represent the base of the breakout area, just above the open, on Oct 5th.
Overnight so far the range is 2543.00-48.25 versus settlement at 44.00. There's little in the way of data today ahead of tomorrows 10 year note auction and FOMC minutes. We may see some two sided balancing activity within the range of the past few days. The longer time frame remains bullish and short term we're in a more neutral/bullish phase as the market balances ahead of it's next directional move.
I have today's initial support at 42.75-44.00 and initial resistance at 49.00-51.00. It's not a strong area of resistance, particularly as the CHVN is at 49.00 so a build above there will likely lead to another all time high and short squeeze. If, however, 49.00 proves difficult to break then this could be a sign that sellers are trying to dominate. The zones above the ATH are not hard resistance, just measured moves based on Fib extended retracements.
Monday Prep
Friday's reaction to the employment report saw a move lower pre-market, below the overnight support zone. This acted as resistance for the cash session, though we didn't see any meaningful sell-off and the RTH range was just 6 points. Volume remained fairly low at 1.1m contracts and the market settled at 2545.00.
The major data for the week starts on Wednesday with the FOMC minutes, PPI on Thursday and CPI & retail sales on Friday.
Overnight so far the range is 2543.25-49.50, overlapping higher to Friday's RTH range. A composite high volume node (CHVN) has formed at 2549.00 which may end up being pivotal for direction if that continues to build.
Zones of interest for today are below. If the 44.75-46.75 zone holds I'd expect to see a further breakout higher. How that breakout occurs needs to be monitored closely to see if it is likely to fail or not, depending on underlying strength. If that zone fails then we could see some short term liquidation into the 38.75-39.75 zone or potentially the zones below if volume, momentum and the other markets are in alignment (i.e NQ & TF). I'm happy to sit out for now as the upside seems over extended short term and I don't want to short yet against the current multi-time frame bias.