Monday Prep

A look at the daily, 240m and 60m charts below from the month end close on Friday show a strong finish to a very strong quarter.

On the daily we can see that it closed above the breakout area formed from the pullback highs in Q4 last year. Value on a monthly basis has moved progressively higher, and the month finished at the value area high for March. This has been helped in part by the big, fast money in CTA Funds - positioning which, according to Nomura estimates, are all 100% long with ratcheting higher sell levels. It’s adjustments to these types of positions that can lead to the fast downside moves seemingly out of nowhere. Couple that with unwinding of short volatility positions and options hedging and you have the tail very much wagging the dog when things go south.

However, for now, short and intermediate term bias remains bullish from the price action.

Overnight there was news of better than expected PMI number from China (was previously in contraction and now showing expansion again). This helped ES gap higher from the globex open and has so far ranged between 2844.50-2861.25 forming a P shaped profile (often seen with a short squeeze).

The high from Friday was 2840.50 and settle was at 2837.75 - ES is currently trading at 2858 so chances of that gap being filled today are low unless news flow changes sentiment.

I’d prefer to wait and see how this day trades and how the market behaves towards the gap before trading. Some areas of interest below on the split overnight and RTH profiles.

Tuesday Prep

Yesterday was a balanced session overall following the initial test lower and reverse off the 2571.75 CHVN area. Volume was the lowest of the year at 1.19m and the RTH range was equal smallest at 19.00 points.

Overnight has ranged between 2580.00-2600.25 vs settle at 2580.50. The market remains within a multi-day balance following a strong rally. The daily ranges have been contracting and volume has been falling leaving us in a neutral/bullish state on the day timeframe.

Monday Prep

The lowest volume of the year again at 1.1m contracts, there was a failed attempt lower following the move lower overnight, and again a late rally into the close, still failing to breakout higher though. My connection to data is down this morning so am unable to do the zones chart for today.

Friday Prep

A quick look at the longer timeframes above show:

Monthly - counter trend rally has regained more than 50% of December’s range, though still below the October low at 2607.25 which was month that started the sell-off

Weekly - second week on new highs after sell-off

Daily - 5 continuous higher high days, though on declining volume

If sellers are going to try and get this market back down, this area could attract multiple time frame players potentially as price moves up towards the October lows. It was the breakdown through there that accelerated the December drop.

Yesterday’s overnight sell off left the market vulnerably short, and after failing to push down into the overnight low there was a sharp turnaround higher. The FOMC minutes added to the volatility given Powell’s apparent flip flopping. Buying was strong into the close leaving the VPOC above the prior day’s high. Volume was the lowest of the year though, which doesn’t support the bullish case very well.

Overnight so far the range is 2597.75-2582.50 vs settle at 2594.00. It remains to be seen if we just consolidate/balance today (possibly targeting the 2571.75 CHVN), balance and move higher to test October low or balance/breakdown. We’re looking likely to open inside yesterday’s range currently which can lead to less clean price action.

Today’s zones of interest below:

Thursday Prep

Wednesday’s zones

Yesterday’s move to the high of the year so far was also on the lowest volume of the year in ES at 1.54m. The morning move higher failed to have strong internals behind it and there was divergence in the advance/decline line early on. The mini liquidation break moved down to test the composite high volume area mentioned yesterday and failed to bring in more sellers once down there. Price regained the bullish tone leaving value once again higher, but failing to breakout to the upside.

Overnight so far the range is 2583.00-2560.50 vs settle at 2582.50. At time of writing price is trading around 2570.00, which is now the key composite high volume node in this range (CHVN).

Zones for today on the split profiles below. With price trading inside multiple days, action could be choppy until there’s a more definitive break one way or the other. Dominance above/below the overnight range will probably be the clearest signal.

Wednesday Prep

Tuesday’s zones

Going into yesterday’s open there had been a strong rally leaving the market about 26 points from the prior close and up against a potential resistance area. There was a steady sell off into the overnight low but downside momentum was not that strong, and advance/declines was still around +500 at the prior settlement. This was a cautionary signal not to get too bearish into a potentially strong support zone.

Once priced could hold above the prior day’s high, a bigger volume distribution built as buyers bought each dip leaving the vpoc at 2574.75.

Overnight has ranged between 2568.50-87.25 vs settle at 2572.50 as the market narrative gets steered back to China trade talks with an official statement expected tomorrow. The overnight profile looks poised to break higher as value builds above yesterday’s value area and high.

Initial potential support and resistance zones I have at 2570-73 and 2589.25-93 respectively. Any break higher will need strong market internals to maintain or risks failing, particularly if opening above yesterday’s high. Overnight support zone I’m using as 79-82.50. The zones above 93.00 are target areas and these may or may not offer resistance depending on market internals and context.

Tuesday Prep

The charts above are the regular trading hours (RTH) of the market & volume profile (left) and 1 min with NYSE TICK & Advances/Declines with vwap (right).

The profile shows another spike of single prints once the prior day high was broken. This leaves several days with single prints recently which signal fast, stop run activity. I’d expect to see these revisited at some point. The upper zone which yesterday’s high pushed into was from a breakdown area on Dec 18th.

The 1 min chart shows strong momentum in the TICK early on and strong market breadth in the A/D line. When the price was close to the prior settlement in the first hour, the A/D had climbed to about 1200 with positive TICK momentum, which was a good sign the rally had legs. A/D isn’t always this useful but because the number is calculated based on the changes from the previous close, this was potentially significant i.e the net 1200 advancers showed the broad market was strong but price in ES hadn’t caught up as it was still at the prior settlement level. Once the high was in, there was a shift in TICK momentum and move back to vwap.

Overnight has continued higher, with the range 2549.25-72.00 vs settle at 2550.50. Using back adjusted data, the low from Feb 6th ‘18 was 2549.00 which is a significant area to hold above/below in my opinion for this rally to continue/fail. Momentum remains in longs favour for now, and I’d look for pullbacks to get bought within the overnight range but below 2549 I’m looking for price to slip lower quite fast potentially.

Today’s zones of potential support/resistance:












Monday Prep

It’s been a long break since my last post and markets have been giving traders some phenomenal opportunities if prepared and able to take on the elevated volatility; it’s certainly not for everyone. As the game evolves, so do the rules of play.

I’m not going to get into the fundamentals in this post as the main aim of the note is provide a technical framework and objective overview of the short term structure, as it relates to intra-day futures trading. However, I will include a more macro fundamental perspective as a weekly note in future for those who are interested.

Above we have the monthly, weekly and daily charts for a long term perspective. The counter-rally we’re currently seeing against the monthly downtrend (within a multi year uptrend) is running up against a key area from last year i.e. the Feb lows. You can see an area of low volume (highlighted on daily chart) which could attract longer term sellers. However, short term, both sides will be active and buying was strong on Friday on the latest narrative led move.

Overnight began with a strong rally higher which reversed off the Feb ‘18 low area and moved back down a tick above the Dec 28 swing high. The range is currently 2523.25-51.75 vs settlement at 2531.25

Momentum and market breadth will need to be strong to continue the rally i.e. positive TICK, A/D and cumulative delta.

Overnight support zones at 2527.00-28.25 & 2520.50-23.50. Holding below the overnight low could see a revisit to Friday’s single print area or lower. However, would expect to see a buying response at the 2499-2501 zone on first test.

Overnight resistance zones at 2537.00-41.75 & 49.00-52.50.

Zones for today below:

Wednesday Prep

The lack of downside pressure after the open saw a wide and fast first half hour (nearly 40 point range). This move was a bit too far, too fast and price action was poor for several hours until buyers regained dominance in the afternoon, pushing to close near the high.

Overnight has kept the upside momentum with the range currently 2682.00-2714.00 versus settle at 2685.50. At current price the market is looking to open on a large gap of approximately 20 points. This will add to pressure on short positions from the last few days and could cause a rapid squeeze in price (next target 2728 CHVN). Whether we see an early attempt to close the gap or just a fast move higher will help determine what type of day we’re likely to see. The least likely expectation is to start trading back inside yesterday’s range, but if that occurs all longs from overnight are offside. Zones of interest for today below:

Tuesday Prep

The early failed breakout above the prior day’s range saw a complete reversal of the overnight move and once below the overnight low things accelerated on the downside with about a 60 point drop followed by a 40 point bounce over the last hour and a half. The extreme TICK readings on the downside indicated some aggressive liquidation going on.

The strong buying tail left on the day will be a useful guide today as if this is going to be an intermediate swing low I’d expect that tail to hold. Therefore I’m using the 2624-28 area as a short term bull/bear zone.

The market overnight has so far ranged between 2636.25-64.25 versus settle at 43.50. If the market can hold above yesterday’s settle then there’s scope to reverse yesterday’s move and squeeze shorts. Zones I’m watching today below: