ES review & plan
Going into yesterday's open the market was short and proceeded to rapidly correct short inventory after the bell. The market found support at the micro composite VPOC at the 2036 area following the CPI and jobless claims. A Philly Fed number, which was a massive outlier, helped keep the bulls in control and the market balanced in roughly a 4 point range between the overnight high at 2048.25 and 2052. The pace of the rally early in the day was a sign that short covering was taking place, along with a P shaped profile.
Volume was just 1.1m contracts and 3.1bn shares on NYSE.
Overnight the market has continued it's upward advance to new highs. Draghi gave a dovish speech early in the European session causing a sell off in EURUSD and pushing the dollar index to highs again. China also announced a surprise cut in interest rates which has added fuel to the rally. The market is potentially going to open strongly imbalanced to the upside with a large gap.
The near term upside measured move from the daily chart is nearly reached. However, I don't see this as an automatic short but will be monitoring order flow closely around this level.
The larger the opening gap, the less likely the gap will be closed during that day. The most probable scenarios I see for today are:
1. The highest odds scenario in my view is that Globex pulls back to VWAP prior to the open, still leaving a large gap, and continues to rally back up to the overnight high and measured target and balances in that range.
2. The gap is closed to the high of yesterday and it continues to rally.
3. The least likely I see happening is that the gap is closed and it accepts into the prior value area.
ES review & plan
Yesterday's open was 1 tick below the prior settlement and after briefly matching that proceeded to target the overnight low and support level at 2044. Once this was broken there was thin volume supporting the move up on Tuesday and the prior low and naked POC/VPOC from Monday was the next target at 2038.50. There was little volume at or below this price and responsive buyers absorbed volume at the 2039 area before pushing back into the overnight range prior to the FOMC minutes forcing shorts to cover. After the minutes there was a 9 handle swing to 2050.50, through the overnight high and at the prior day VPOC, then back to 2041.50 as weak hands were forced out of positions and then rallying to close just under the prior day's close. Value was left overlapping lower. 3.4bn shares traded on NYSE and 1.1m ES contracts.
The overnight market has so far been weak testing for support below yesterday's lows. CPI and jobless claims are due at 07:30 ct.
The value area from last week remains the most important for longs to defend. If there is acceptance below the mcVPOC at 2036 we will probably see a rotation to the other side of value to 2032 at least.
My expected scenarios today are either:
1. Holds above last week's value area and trade within yesterday's range.
2. Start to rotate back into last weeks balance area with support above 2036
3. Acceptance into last week's balance and rotation lower to target the low of the range.
ES review & plan
After the very balanced range last week and this Monday, we finally had an imbalanced move higher breaking through the 2043.75 high. This leaves a decent volume area for bulls to defend going forward between 2030-40, with 2036 the micro composite VPOC.
The opening drive left a 4.75 point spike and one timeframed higher for the day until the last hour when there was an inventory correction and close at the VWAP. A poor high has been left at 2054.00.
This shows a renko chart with the VWAP and 1,2 & 3 standard deviation bands with cumulative delta bars below.
Divergence in the cumulative delta can be seen prior to the new price highs and subsequent correction to the VWAP exactly at the close.
Bulls need to defend the C period pullback low at 2044.00 (top of the spike) or risk a liquidation break back into the prior range. The initial upside target remains the 2069.25 measured move.
The Fed minutes are released at 13:00 cst so we should see a pick up in volatility but don't intend having a position into the release. If there are long opportunities in the morning based on yesterday's levels I may take them but I'll probably sit out until after the release of the minutes.
If the news is received badly prices will likely fall back into prior balance, but if last week's range breaks we could see a long anticipated liquidation break through multiple downside levels of swing lows, LVNs and HVNs. Not a high odds scenario today but still a possibility with headline risk.
ES Weekend Review & Plan
Friday's trade was tight and range bound within the balance of the week and finished strong at 2038.00. Volume was just over 1m contracts and 3.2bn shares traded on NYSE.
Although balanced, the POC/VPOC has moved higher each day this week, leaving the micro composite VPOC at 2036.00 and a value area between 2032.00-2037.50.
The weekly trend remains up and this pause in momentum maybe temporary before further continuation higher. Seasonal factors remain bullish and the initial measured weekly target is 2069.25. With volatility this low, option downside insurance is cheaper as well.
The most likely possible scenarios I see at the start of this week are:
1. Acceptance above the value area of last week and an imbalanced move higher towards the weekly measured target.
2. Continue within last weeks range giving opportunities to fade value.
3. Open within range but test the lower end of the range again and attempt to push lower.
Here is this week's US economic calendar.
ES review & plan
Yesterday saw new highs again (2043.75) during the Asian session and a correction of long inventory prior to the jobless claims announcement. The pit session opened at the top of the prior day's range and drove higher towards the overnight high but lost momentum 2 ticks short and weak longs liquidated drawing in shorts to target the overnight low and prior day's low. It closed close to the middle of the high volume balance area created this week. Confidence is low. Volume was a modest 1.5m contracts and 3.47bn shares on NYSE.
Retail sales are due at 07:30 cst with consensus expectations for a 0.2% rise.
The 3 most likely scenarios I see playing out today are either:
1. The high volume balance area between 2030.50-2037.50 acts as support before an attempt to move higher and make new pit session highs and a Friday afternoon inventory correction back into balance.
2. We remain within balance and rotate back and forth before a break lower targeting last Friday's low at 2020.50
3. Prices open at the lower end of balance and drive lower through 2020.50 towards the next high volume nodes at 2015.50 and 2010.00
Although we continue to see day after day new highs, confidence remains low this week particularly, and volume is unexciting. Seasonal factors are on the market's side but I think it's a case of enjoy the party but dance by the door!
ES review & plan
Yesterday's overnight market traded below Tuesday's range and for a short while it looked as if we may be about to see a long awaited liquidation break. However, buyers stepped up and supported prices at the recent high volume area around 2028, which is where the market opened and only moved a tick lower. An overnight inventory correction rally ensued. Value initially looked to be overlapping lower but shifted back up to be balanced with the prior day. As more time and volume was spent in the 2034-36 area it looked as if a push was about to take out the prior day's poor high and all time globex high, but a liquidation break prevented that from happening. An attempt to do this late in the day left another poor high. This leaves two back to back poor highs to carry forward and an all time high only reached during the overnight market so far.
Volume was 1.08m contracts and 3.27bn shares traded on NYSE.
The overnight range so far as at 03:00 cst is 2033.50-2043.00, lifted by Asian markets and specifically by talk of possible stimulus measures to banks in China and a potential snap election in Japan. There are jobless claims at 07:30 cst and JOLTS at 09:00 cst.
The most likely scenarios I see today are:
1. A test of support around yesterday's POC/VPOC and a move to all time highs for the pit session with continued liquidation breaks during the day.
2. Balance within the last 3 days range and around the most volume at price at 2033.25
3. Open in yesterday's range and begin to accept below the 2029.50 high volume node from yesterday and target the poor low on Monday at 2025.75, then the 2020.50 low.
ES Review & Plan
Yesterday's trade was very light in terms of volume due to Veterans Day (779k contracts & 2.95bn shares on NYSE) . The majority of time spent and volume traded was within the upper distribution from Monday, and value was left overlapping higher. A new all time high was left in Globex at 2039.00 which was not matched during the pit session. The poor high that was left on the day could be a sign that the rally is tired, although the day appeared to be dominated by day timeframe traders.
The Vix is back to the 12.5/13 level making downside protection with out of the money puts a lot more attractive. It's a light economic calendar today, with a 10yr note auction at 12:00pm cst.
The most likely scenarios I envisage today are either:
1. Support remains above Monday's lower distribution and value drifts higher to take out yesterday's globex high and then falls back to find support within the last two days range.
2. The market opens within yesterday's range but fails to hold above the 2033/34 area and a liquidation break pushes to Monday's low and into Friday's range, regaining support around the 2028 high volume area.
3. The market opens below yesterday's range and one-timeframes lower targeting multiple downside references and stops areas.
ES Review & Plan
Yesterday saw highs pushed further on a slow and relatively narrow range day. The early low tagged the prior settlement and 50% of the prior day's range. The low that was left was poor, however, before a rally higher though the prior day's high establishing value higher on the day leaving a 2032.75 POC (2033.00 VPOC). Cumulative delta (i.e. the net of volume taken on the offer vs hit on the bid) trended higher throughout the day once the low was in. The high left is weak. Volume was just 957k contracts and 3.28bn shares on NYSE.
There are two clear distributions to treat separately, split at 2030.25.
We have yet to see any signs of excess on the highs and the VIX is showing signs of complacency. Stops must be stacking up trailing the higher daily lows and leave the market vulnerable to a compounding down move, but for now this would be betting against your friend, the trend.
Bond markets are closed for Veterans Day but equities are likely to be quieter and possibly slippier in price. Globex has made new highs at 2039.00 as at 03.00 cst. There are no economic announcements due today.
The bias remains to the long side. Possible scenarios today are:
1. Higher value, finding early support at yesterday's upper distribution lower extreme at the lowest before continuing higher in slow trade.
2. Buyers fail to hold above yesterday's upper distribution and prices balance within Friday's range but finding support around the high volume area at 2028.00.
3. Longs liquidate bringing short term shorts into the market to attempt to push beyond last Thursday's low and back into the balance area between 2019.25-1995.25.
ES Review & Plan
Friday saw a muted reaction to the employment report and was a disappointment in terms of volatility. Globex had been trading higher all morning making another new high at 2033.50. This left overnight inventory long after the number and there was a correction and some downside follow through to a couple of points below the POC/VPOC from Thursday.
Value was overlapping higher on the day, but failed to hit the 2033.50 level during the pit session which is information to carry forward as a possible attempt to revisit in the future. Trade was slow for most of the session. 1.28m ES contracts traded and 3.7bn shares traded on the NYSE composite, which was relatively light. A wide POC was left at 2027.50 which is likely to be an important pivot area for Monday.
Upside levels intially to watch are Friday's pit high and globex high. 2034.00 and 2052.75 are the next measured range extension moves I'm watching.
The downside initally has Friday's pit low at 2020.50, then 2012 being the top of Thursday's single prints. 2010.00 is the micro composite VPOC and is a bull/bear zone, with a break likely to test the 2002.25 and 1988.75 targets.
ES Review & Plan
Another day, another all time high! Draghi's hint at opening up the war chest sent European markets higher and helped maintain a bid to the ES. The dollar index hit new highs and bonds fell, along with continued weakness in the energy complex and precious metals.
The market opened within Wednesday's range, after making a new high in Globex and pulling back from a measured range extension move at 2025.75. The overnight inventory was net long and after a brief look above the prior high, weak longs liquidated and shorts targeted the overnight low at 2012.25. There was little interest below that level and after matching the lunchtime pullback low from Wednesday, buyers regained control back up through the open and then a slow grind higher for the rest of the session leaving value overlapping higher.
Futures volume was low at 1.4m contracts, which has been the average for the entire week. This is half of what we saw on the big down move.
Overnight in the Asian session prices have drifted higher. The employment report and Janet Yellen speaking today are going to be market movers and increase volatility. There's a lot baked in to this rally already but it continues to one timeframe higher on a daily, weekly and monthly basis. The next measured move is at 2034.00 to watch for any reaction. The low volume, volatility and absence of fear mongering headlines is unlikely to remain for long, leaving the market susceptible to a sharp break. Any acceptance below 2010.00 should see the 1990-80 region revisited.
