Monday Prep
Since the all time high at 2878.50 (made in overnight session) to the Feb 6th low at 2529.00, we have a wide trading range established whose mid point currently is at 2703.75, about 1% away from the market currently. March has so far traded inside the value area of February and Friday's trade showed a rejection of lower prices and a 49 point rally from the 2647.00 low.
There's a shelf of volume on the composite profile between 2684-88 (see below chart, rhs). Whichever side can dominate above or below that area I'd suggest is in the driving seat today. If in doubt stay out, and that's what I'm doing for now as I'm not a fan of trading in the middle of ranges.
Tuesday Prep
Another bullish session with RTH gapping above the recent range and failing to fill that gap on the attempt in the morning. Once reversed and trading above the Feb 5th high at 2763.00, bulls are fully in control and shorting becomes a dangerous option.
We are leaving weak structure behind but the immediate pressure remains higher, as the market gravitates towards the high volume 2800-2805 area (with 2800 a high option open interest level too).
FOMC Chair Powell testifies today, so expect volatility as the order book evaporates and the dollar and bonds likely drive moves.
Zones for today are below and will be cautious on shorts unless evidence shows up things have changed in the short term. The market is stretched short term so a good idea to exercise patience, especially ahead of the testimony later.
I'm travelling tonight and tomorrow so will update again on Thursday morning.
Monday Prep
Did I miss much??!!
Apologies for the long break in service but I intend to get back to providing my market analysis, review and zones of interest for the ES with immediate effect. Thank you to a very kind reader who emailed recently and encouraged me to get writing again.
A lot has been happening since I last wrote in early December. The most recent events in February have eclipsed what was a parabolic rise in January. Structurally, there have been some key drivers behind these moves. Shorty volatility strategies being the main one and the break down in this along with concerns of wage inflation beginning to show and a pick up in yields are all contributing factors. The era of super low volatility is likely to be over, which is fantastic news for us traders. That doesn't mean we couldn't still make new all time highs, but if that did happen expect more volatile swings than we saw last year.
An overview of the daily chart below shows the monthly volume profiles along with a 20 and 200 day moving average. There was close to a 200 point bounce off the 200 day moving average before a re-test and the rally we've seen since.
A look at Friday's action on the market profile in closer detail below:
The key levels above Friday's close are the low from Friday Feb 2nd at 2755.25 and the high on Monday Feb 5th at 2763.00. If this rally cannot push through that 2755.25 level and we see sellers defending that breakdown point, then any short term 'weak' longs are likely to bail out and accentuate a liquidation break lower.
Continuation higher looks likely from the price action, especially if the Feb 5th high is breached which would be another failure point for shorts and covering needed.
Below is the hourly chart with Feb's volume profile. I'd be very cautious shorting this until we see a break down and failed retest of recent highs.
A closer look at the RTH profiles from 2nd & 5th Feb show where the market is attempting to back and fill if we see a continuation higher today:
I'll update zones this week but in the meantime, initial resistance potential is at 2755.25, then 63.00 and initial support at 2727.75-2729.75 (break out area from Friday).
The new FOMC Chairman, Jerome Powell, is speaking on monetary policy at 10am ET tomorrow and Thursday so expect a pick up in volatility again this week.
Friday Prep
I'm still using the Dec contract until Monday even though volume has started to be higher overnight into March.
Yesterday opened at 27.75 and immediately tested the overnight low and we got a one tick failure below followed by a reversal. The immediate target then becomes the overnight high at 37.00. Value pushed higher on the day but market internals were not particularly supportive of the move.
Overnight we've had the employment report and the range is currently 37.75-49.50, extending up into the 48.75-50.75 resistance zone (where the poor high is shown in profile chart at the top). If upside momentum fades, we may just balance between initial support and resistance. A break and hold above IR will continue to trap shorts and see a squeeze. If initial support fails and prices accept back in yesterday's value area, we could still see buyers step below.
Thursday Prep
Going into yesterday's open I was using 25.50-27.50 as the bull/bear zone. It did act as support during the morning with weakening internals. The fast break under 25.50 was a head fake and then saw trapped shorts squeezed with a move up to initial resistance (the morning high tagged the prior day overnight low at 33.75). After the attempted flush lower and the market moved back into the bull/bear zone, you can see below a new TICK high as underlying momentum shifted temporarily.
The Russell was weak and Nasdaq relatively strong, so there was a lack of confluence with all three removing conviction for a directional move in ES.
A balanced profile was left and both sides of the first hour range (initial balance) were broken and the market settled around it's POC/VPOC /mid and VWAP. The 25.50 CHVN held as support and remains an important short term pivot. The prior month mid at 27.50 also remains important in my view for the longer term bull trend to continue.
Overnight so far we've seen an initial push higher to 2637.00 followed by a steady decline back to 27.50 currently.
The zones I'm using today are below. We remain in a two sided market state with prices at a critical juncture for the intermediate trend, I believe.
Wednesday Prep
Apologies for the long break from the daily note; at least we are beginning to see bigger daily ranges and some signs that sellers efforts are not fruitless in the past few sessions.
The pullback from the 2665.25 all time high has seen a move back to 2620.00 overnight, with most volume trading around the CHVN and last month's VPOC at 2625.50. Last month's mid was at 2627.50, and for the long term trend to stand a chance of continuing I'd want to see the market rally back above there and retest it for support. I'm using a bull/bear zone at 2625.50-27.50 for now. If we break and hold below the overnight low at 2620.00 we could see further liquidation down to retest last Friday's low. Above the bull/bear, I'd expect to see responsive sellers step in at the red zones. Any particularly positively spun news headlines could trap shorts and see a sharp squeeze, however.
The range so far overnight is 2620.00-31.50 versus settlement at 28.25
Today's zones are shown below. The profiles which are shown split are the RTH times and the closed ones the overnight market.
Friday Prep
The strong rally overnight yesterday found support pre-market at the initial support zone, but this didn't get tested again after the open. The gap above the prior high left shorts in trouble and a the trend day higher would've been fueled early on by covering. You can see from the profile chart at the top how the declining market over the prior 3 days had left shorts vulnerable to a squeeze. I've highlighted the single prints left yesterday from the forcing action early on, which we may or may not see repaired today.
Once the bull/bear zone was broken there was a pullback to re-test 79.25 which was a composite low volume node (CLVN). The move higher fell a couple of ticks short of the 90.00-92.50 zone and drifted back towards VWAP into the close.
Overnight so far the range is 79.50-86.00 versus settlement at 85.00. Note the overnight low is 1 tick above the bull/bear and the CLVN. Acceptance back below the overnight low will be significant as there maybe an attempt to fill the range and settlement gap below, dependent on market context and price action etc. Acceptance back above settlement puts the bulls firmly back in the driving seat and has potential for a crack at the highs, though would still be watching for reactions at the red zones.
My zones of interest for today below.
Thursday Prep
From yesterday's prep: holding below the 62 level could see a long liquidation break down and see shorts push lower. For the intermediate time frame to remain bullish I'd want to see the 2549.00 level hold, which was last month's mid, VPOC and POC. If the market cannot hold below 62.00, shorts will be trapped and we could see a covering rally, though looking for sellers to step in at today's red zones.
Opening at 66.25, we got a move into the 62.0-63.50 zone straight away and some heavy volume driving through the overnight low and getting a fast liquidation break down to the 55.50-56.25 zone where responsive buyers stepped in. There was no downside follow through and stock momentum started to turn positive and the A/D trended higher from it's lows. Once back above the overnight low shorts were in trouble and we got a move up to the second resistance zone, which included the prior mid and Monday's low. Sellers stepped in and there was another test of the overnight low before the close before settlement at 2565.00
We had range extension lower for the month, but still holding above October's mid and VPOC at 49.00. Big picture's still bullish technically and the all time high hasn't been hit during RTH yet.
Overnight the range is 2562.25-75.75 having steadily moved higher all morning. We may see some correction of overnight longs after the open, though if the market is set to push higher I'd expect the 71.25-72.50 zone to hold. If not, 68.00-69.00 and 63.25-65.25 are areas I'd watch for responsive buying and potentially 57.50-59.00 depending on market context.
Above, a break and hold above 79.25 gets the market short term bullish again, in line with the longer term.
My zones of interest for today:
Wednesday Prep
Going into yesterday I had a bull/bear zone at 77.25-79.25. Below there put the current range extreme zone at 62.00-63.50 in the sights. The move down fell a few ticks short of that zone and saw a fast short covering move back up into the bull/bear zone, which was tested several times, saw a pullback into the initial support and a further attempt higher into the close but failing to break above leaving a poor high.
Overnight has traded lower since the ETH open, pushing down into the critical range support zone at 62.00-63.50 and making a new low for the month. The range is currently 2577.00-62.00 versus settlement at 2578.00.
As mentioned a few times recently, holding below the 62 level could see a long liquidation break down and see shorts push lower. For the intermediate time frame to remain bullish I'd want to see the 2549.00 level hold, which was last month's mid, VPOC and POC. If the market cannot hold below 62.00, shorts will be trapped and we could see a covering rally, though looking for sellers to step in at today's red zones. A rally back up through the 72.50 level puts the overnight high next target and the poor high and bull/bear zone next, which will bring more buyers in above.
Today's zones of interest:
Tuesday Prep
From yesterday's prep: There remain weak highs above which have a good chance of being taken out if the 72.50 level can hold, which is a composite high volume node (CHVN).
The market opened at the 72.50 CHVN after overnight attempting to force out some weak longs. Once open, shorts were trapped below the initial support zone from overnight and we saw a spike higher in the first 30 mins as seen on the profile chart.
Also from the prep: On the upside we still have the IR zone at 78.00-79.50 which if broken becomes support, as we saw on Friday.
We can see this is exactly what happened after the initial blast through the IR zone, with the pullback into it giving another buying opportunity for both new longs and covering shorts. Having rejected the overnight low, the target became the overnight high after taking out the weak high from Friday. As is often typical with a short covering day, we had a P shaped profile formed.
Overnight so far the range is 2575.25-82.25 on light volume. I'm using 77.25-79.25 as the short term bull/bear zone. Above there, the all time highs are back on the cards with some expected responses at the red zones shown.
If that zone doesn't hold then yesterday's low comes back into target in the 70.25-72.50 zone. We could see a buy response of the 67.25-68.25 and 62.00-63.50 zones, which were launching areas from last Thursday. Acceptance below there traps the recent longs and we could see a liquidation break. Also from yesterday: This month's low is at 62.25, which if broken puts last month's VPOC/POC and mid point into play at 2549.00. If the market begins to accept below that level risks derailing the bull in the intermediate time frame and we could finally get a move lower to retest the breakout from the 2504-09 area.