Wednesday Prep
Overall, a balanced day with a break above Monday’s high but failing to move through 2900. Not particularly clean price action and my zone placement was poor today. This is something to be aware of if choosing zones when trading inside prior day ranges and the market has traded through many times before in that time.
The failure to hold above my bull/bear zone at 93-95 leaves me thinking this was just a short term bounce and we could be setting up to take out Monday’s weak low at 2866. Until the market holds above 93-95, I’ve a short term bearish/neutral bias.
Overnight so far has ranged between 2875.50-91.25, with weakness in the past hour or so dropping 14 points. If we don’t see a correction to the overnight short positioning after the open this could be a sign of more serious selling. Some caution might be needed on longs below the 70.50-71.50 zone as that’s back below last month’s low and potential to bring in more sellers again.
Today’s zones below showing the overnight and yesterday’s RTH profiles split out:
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:
Monday Prep
Friday’s price action was once again dominated by sellers in the morning session after opening at the prior vpoc and making a brief attempt higher into the 2913-16 zone. This zone represented the edge of the prior day’s single prints and the overnight high.
The move lower sliced through the overnight low leaving single prints between 2895.00-99.50, separating the distributions on the day. The poor low at 73.25 stopped short of the 69.50-72.50 zone and thereby holding within the prior month’s range. The market settled at 2894.00 on high volume of 2.2m contracts, closing just below the January high of 2894.50. Yields were once again higher in treasuries, with the 10 yr at 3.23%.
Overnight so far the range is 2882.50-98.25 (2898.25 was Friday’s overnight low). The bond market is closed for Colombus Day but stocks remain open. The ongoing problems in Italy and the large drop in Chinese stocks after returning from holiday (despite a 1% cut in the RRR for some banks) has added to weakness in European markets.
For ES today, in the absence of economic data, we may see trade inside of Friday’s wide range. The selling of the past few days leaves the possibility of a short squeeze holding above Friday’s settle or if that fails to happen, the probability of a test of last month’s low increases. 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.
Today’s zones below:
Friday Prep
Going into yesterday’s open, the overnight market had traded lower and was attempting to move back up towards the prior day’s low. As stated in yesterday’s note: ‘a move higher that fails to move back inside yesterday’s range is bearish..’.
The first move after the open was a test of the 2924.00-2925.50 zone (marking the lows from the prior two days) and this was immediately rejected, giving a heads up. The first break through last week’s low (2907.50) saw a pause and bounce from the 05-06 zone back up to the overnight low, giving another good opportunity to get on the short side. Once broken through the prior week’s low, the breakout high from January was next target, which saw roughly a 10 point bounce off it. New lows were made in the afternoon with cumulative delta showing a divergence, eventually moving back to vpoc (2907.75), settling at the same level…1 tick above the prior week’s low.
Overnight has ranged between 2900.75-2915.50 so far, ahead of a keenly watched employment report at 07:30 cst. Despite the breakdown in the daily and weekly bars, the monthly remains neutral, inside September’s range currently. It was at least the beginning of some range expansion and volatility, which is a welcome sight with lots of rotation opportunities.
Zones of interest for today below:
Thursday Prep
As mentioned in yesterday’s note, the move higher towards the all time high needed strength and momentum or we could see a short squeeze and false breakout. We got the breakout above the 40-42.50 zone but there was no follow through or sustained momentum. After bouncing between the two zones for much of the day, the break lower was sharp, trapping longs, and left single prints and a double distribution on the day (testing the overnight low in the last half hour), along with a selling tail off the highs.
The fact that ES had held up for so long was surprising as the bond market had taken a pounding, with a breakout higher in yields across the curve after stronger than expect ADP payrolls numbers.
Overnight so far markets globally have sold off, with ES range at 2913.25-2931.75, versus settle at 2931.50. Volume has continued to be heavy in the 10 year, with the cash yield around 3.22% currently. Whether this continues today, ahead of tomorrow’s employment report, remains to be seen.
I’m cautious about getting too bearish until we see acceptance below the 2907-08 zone, as mentioned earlier this week. Clearly, a move higher that fails to move back inside yesterday’s range is bearish but acceptance back inside the range could squeeze shorts.
Zones of interest for today below (showing yesterday’s RTH and the overnight profiles):
Wednesday Prep
The early part of the session yesterday saw a test of the overnight high and reverse lower to 2924 before a short squeeze back to the 2930-31 zone. There was a weak attempt higher, as can be seen in the neutral TICK and negative cumulative delta. This led to a collapse in price and retest of the day’s low late on, before a reversion to the mean (vwap) into the close. The day finished inside the prior day and left with a poor high and low. VPOC and settlement was at 2928.50.
Overnight so far, the range is 2925.75-40.00 so far, close to Monday’s high of 2942.00. Longer time frames remain bullish and short term has been more neutral though is close to breaking out higher once more. Fundamentally I think we’re in for a serious correction, but I have to ignore this when trading intraday and just follow the flows and momentum as they are at present. Until there’s more evidence of a breakdown, I would expect pullbacks to be bought and continuation higher. I mentioned the 2707-08 zone yesterday which I think is pivotal to any potential breakdown.
Zones of interest for today below. The all time high is at 2947.00 - a lot will depend on the underlying strength if it gets there today, though a forced short covering could see a spike leading to a false breakout.
Tuesday Prep
RTH
RTH
The first day of the month/quarter opened on a wide gap higher to the previous day’s high and settle. If we don’t see an early attempt to fill the gap then we’re more likely to see continuation in the direction of the gap. There was a break and hold above the 2936-38 zone, with volume building there and the day’s VPOC left at 2939. However, the underlying sustained momentum turned negative on the TICK quite early on, giving a warning that further continuation was much less likely (see chart above) and this had been a false breakout higher.
Once the market had broken below the vwap and vpoc, with negative underlying momentum, the gap fill attempt was back on following the liquidation break.
Overnight so far has ranged between 2917.50-30.75 versus settlement at 2930.00. There’s a prominent HVN at 2919.00 on the composite volume profile, so watch how price & order flow reacts if it gets back there
The biggest test short term for the ES in my view is if we see a move down to the 2907-08 area which is now looking weak following the multiple attempts to break it. If that area breaks we could see much more selling pile on, but again, context is key relating to price action, order flow and momentum (which is critical if using the zones)
Look out for a short squeeze higher to potentially retest the vpoc from yesterday at 2939.00 if prices hold above the 2930-31 zone. The market remains in the middle of a pretty congested area from the past week or so which means I need to be very selective and patient. Zones of interest for today below:
Monday Prep
Friday’s last day of the quarter saw some quite erratic moves over the afternoon but left a relatively small range and within the balance of the prior days. A prominent VPOC was left at 2919.00.
The quarter and monthly bars were one-time framing higher, with the weekly bar inside the prior week and daily opening below the prior day’s range and moving back inside for almost all of the RTH session.
The 2907-08 area has been tested several times now so if we do seem a break lower the chances have increased of that area breaking on another attempt.
With the news over the weekend regarding the Nafta deal, trade overnight has ranged between 2922.50-2937.75 so far, above Friday’s high and currently looking to gap higher. Friday’s settle was 2919.00 and high at 2925.50. Failure to close the gap early on gives buyers the upper hand and puts the all time high back in sight.
Zones of interest for today:
Thursday Prep
Post-FOMC we saw an attempt to continue higher which rapidly ran out of steam after Powell’s press conference finished. Rapid liquidation and very heavy market on close (MOC) selling on NYSE left a volume distribution at the low end of the day’s trade, settling at 2911.50.
Overnight has retested the 2907.50 low and bounced, currently trading within the single prints left from the afternoon drop. The range is 2907.50-16.25 so far.
The monthly and weekly bars remain bullish for now, though there’s been a clear breakdown on the daily, short term, with high underlying share volume (though approaching quarter end this is expected). The single prints left from yesterday could be retraced if the market can hold above settlement and the top of the volume distribution left. However, my main expectation is for sellers to step in on rallies until proved otherwise. A move back above yesterday’s VPOC would change this expectation as it would have needed significant buying power.
Opening and holding below the 2912 area would be more bearish, and I’d be looking for downward continuation. Last week’s low was 2883.50.
Zones of interest for today are below and US data due here :
Tuesday Prep
The RTH profile above shows the open gap left from the breakout higher at the start of last week. There also hasn't yet been a retest of the 2888.75 January high (back-adjusted).
Overnight, following the labor day holiday, the price action has been pushing lower from a high of 2912.00 to a low of 2891.75 (Friday's low) versus Friday settlement at 2902.00.
I'm using a short term bull/bear zone as 2895.50-97.50 (Thursday RTH low at 95.50 & Friday's open at 97.50). The longer time frame bias remains bullish and short term I'm watching to see how the market reacts at the bull/bear zone. Holding below there could be setting up for a gap fill attempt lower into the 2874.75-77.50 zone. Above the bull/bear, there'll be pressure on the overnight shorts and we could make a move back to settlement and potentially higher into the 2911-13 zone. Above there I would expect more buyers to come into the market and keep momentum going higher.