ES review & plan
In the aftermath of yesterday's overnight Swiss bombshell, the ES had a fairly volatile day. The open saw a push higher to tag Tuesday's settlement gap and then auctioned aggressively lower. The POC/VPOC finished several points lower than Wednesday and value overlapped lower.
There was heavy selling into the close, and this continued as soon as electronic trade re-opened at 5pm ct.
NYSE composite volume was 4.2 bn shares
The overnight range has pushed down to 1970.25 and back up to 1 tick under settlement. The December low at 1961.50 looks to be the next target. There is a composite LVN at 1964.50 which may see first touch responsive buyers. Closing below the December low would be very negative and could trigger a cascade down to the 1900 area and attempt to fill the RTH gap.
There is an A-B-C corrective pattern with 100% measured move to 1956.75, which coincides with a composite high volume node. 161.8% measured move would be to the bottom of the open gap and a composite low volume node at 1892.25.
If prices accept above yesterday's afternoon pullback high at 1998.25, then a short covering rally is likely. There is a bank holiday on Monday so there may be quite a bit of book squaring going into the weekend.
ES review & plan
Yesterday saw the market get very short on the slow approach to the 6th Jan low, which it eventually broke through leaving an excess low, and then rallied hard forcing a rapid short covering. NYSE composite volume was a healthy 4.3bn shares
Overnight has seen over a 30 point range following news that the SNB have removed their currency cap on the Swiss Franc and moved their deposit rate further into the negative to -0.75%. EURCHF went from 1.20 to 0.75 at one point, and has now settled around 1.05. This has potential for major funds to have been wiped out and we could see knock on effects in the next few weeks and months I think. I wouldn't be surprised to see a big sell off through yesterday's low as funds are forced to liquidate assets. However, I'll need to be guided by market generated information for any trades long or short. Volatility will be high so I intend to let things settle down after the open.
The overnight profile shows the wide range and volatility:
2018.50 is a bull/bear zone as the highest volume at price in the current range. Failure to hold above should target yesterday's low and the 1957.50 HVN and measured move.
Once accepting above this level, the 2029 HVN above is the next target and the thin profile above from Tuesday.
ES review & plan
Yesterday was quite a rollercoaster ride with over 50 points of range on the day. Volume on the NYSE composite was 4.1bn shares, nothing exceptional given the range on the day. The overnight market had been strong and driven rapid short covering. There was an open drive at the bell and the high was put in early. There then ensued a rapid liquidation of weak longs on news that the world bank had cut global growth forecasts. Copper was the worst hit of the commodities and bonds rallied giving yet more record low yields.
The afternoon pullback high at 2022.75 is a bull/bear level to watch.
Overnight has pressed lower, just short of the naked POC/VPOC from the 6th Jan. Volatility is high and liquidity thin.
The daily ETH chart shows the coiling pattern going on in the index. If we are in a simple A-B-C corrective move, this would target 1957 which is also the highest volume node on the composite profile.
ES review & plan
Yesterday saw a very similar pattern day to Friday forming a long liquidation b shaped profile. Volume was 1.6m contracts, which is above average, but the underlying NYSE composite volume was just 3.3 bn shares, which shows a lack of participation from the longer timeframe.
On the open the brief rally stopped a tick under Friday's initial balance low and the target then quickly became the overnight low and open gap. There is a spike above 2029.25 which is bullish if the market opens and holds above, particularly if it moves back into Friday's RTH range. If the open is within the value area formed yesterday we may see choppy trade and a test of the lows. The fact we have moved sharply lower on declining share volume is a clue we have possibly finished this short term liquidation and removed a lot of weak hands from the market.
Crude continues to sell off overnight ($44.21 low) but the indices are not following. The dollar, bonds, equities and gold are all higher. There is the JOLTS report at 9am ct, the Fed's Plosser and Kocherlakota give speeches and there is a 10 year auction at midday.
ES review & plan
Friday saw an outside range day in RTH, opening above Thursday's high and closing below it's low. The rapid short covering rally last week may need to back and fill the still open range gap before any attempt at the highs again.
There was a brief test higher followed by a drive lower after the open on Friday, following the jobs report. Value was lower on the day forming balance around a prominent POC/VPOC, Opening within this area today might lead to chop until moving out of balance. The key references initially will be the overnight high and low (2048.25/2032.50), the friday afternoon pullback high (2047.00), VPOC/POC (2041.00/2040.75), settlement (2035.25) and the poor low at 2031.25. Acceptance below the overnight low should target the remainder of the open gap down to 2023.75. Acceptance above the Friday pullback high could squeeze shorts and initially target Thursday's VPOC/POC and then long selling tail from Friday. Crude remains weak and the dollar continues to strengthen. There are no major economic releases today, a 3yr auction and the Fed's Lockhart is giving a speech on monetary policy mid morning.
ES review & plan
Yesterday's overnight move pushed through buy stops and accelerated the short covering rally to leave a large gap at the open. The continued push higher left a short covering P profile with a lot of clear air underneath to rapidly retest if we see a disappointing employment report or other headline risk. The short covering would have weakened the structure somewhat on the way up having taken a lot of buyers out of the market.
Short term value is attempting to move higher, and has done so extremely rapidly. 2047.25 is a bull/bear level for me which is 50% of yesterday's RTH range. The employment report is at 7:30am ct, so increased volatility is expected.
ES review & plan
A look at the weekly chart shows the market forming a balance area between the Dec low and poor all time high. The odds remain low that the poor high will remain as there is little sign that the long term auction to the upside has finished. If we see continuation higher and a break above the current high, the long term objective remains 2156.00 (161.8% of Oct'07 to Mar '09 range).
If prices break further through the Dec low we could see another 100 points off quite quickly and a wider balance area form.
Following the down move to the 3 day balance leading up to the last Fed announcement, it would appear longer timeframes stepped in with responsive buying. Yesterday saw the first shift up in value and pressure increasing on any laggard shorts. Overnight the market has popped higher through the important 2025.50 level and up to 1 tick above Monday's RTH open at 2038.50. The 50% retrace of the whole move down is at 2036.50.
Following the break through the downtrend, the next upside target is 2048.00, the nVPOC on Jan 2nd.
ES review & plan
The first hour of trade yesterday was choppy as it had opened within the prior day's value area. After pushing through the overnight high and then failing to hold above it, weak longs liquidated and shorts pushed through Monday's poor low and the target became the POC/VPOC of the 3 day balance leading up to the Fed announcement.
Volume was a healthy 2.3m contracts and 4.4bn shares traded on NYSE. The low was put in at lunch time and an aggressive 26 point bounce, no doubt fueled by short covering, briefly went into Monday's range again before falling back towards the prominent POC/VPOC at settlement.
The short term trend remains down though the buying tail and responsive action yesterday afternoon may hint that we are transitioning into a balancing phase before a move higher again.
Again, yesterday's POC will be pivotal and if prices accept and volume builds below 1986.50, the Dec low at 1961.50 is the next objective and a high volume area on the composite profile between 1950-60.
We are close to breaking out of the downward trend line of the past week. Prices should really start to accelerate higher if buyers can hold above 2025.50. Under this we may just have a wide balancing area to rotate through and find value.
The overnight action has been positive so far with a range currently of 1995.75-2009.00. Eurozone inflation turned negative even on record low unemployment from Germany, increasing the odds the ECB takes more action at the next meeting. The euro has dropped to 1.1850, the dollar index continues to push higher near 92 and feb crude has made another low at $46.83.
ES review & plan
The first full week of the year began with a 30 point sell off. NYSE composite volume wasn't high at 3.8bn shares though 2m emini contracts traded, which is above average.
Once prices moved away from Friday's range after a brief push into the buying tail from Friday, and the open gap between 2011.00-2026.75 was then in play and was filled. Continued weakness in crude added to the emotionally driven selling.
The initial balance low at 2025.50 is now an important bull/bear level for today as failure to re-enter that zone saw a further 15 point break in E period. There is a lack of elongation on the downside, a b profile formation combined with a poor low and several anomalies which show that the trade was probably dominated by short term trading and not longer term money selling.
Yesterday's settlement and POC/VPOC will be an important bull/bear pivot area into the open around 2014.50-2016.00. If we see acceptance below and a push through yesterday's low the next major target below is the POC of the 3 days of balance up to the Fed's last announcement at 1986.50. If longs push above 2025.50 we could see a strong short covering rally, otherwise we likely balance within yesterday's value area.
Overnight the range is 2011.50-2022.50 with inventory likely neutral currently.
ES review & plan
Activity on the first trading day of the year produced nearly 30 points of range and 1.3m emini contracts traded. NYSE composite volume was light though at 2.7bn shares. The TICK was +/- 1000 on several occasions, with no real bias and the A/D ratio was marginally positive despite the acceptance below last Wednesday's low and looking a very negative day.
Observations:
1. There is no sign of excess at the all time high at 2088.75 therefore showing higher odds that the long term auction up is not over yet. The upside measured move based on the continuous back adjusted monthly charts is 2156.00 being 161.8% of the Oct '07 high to Mar '09 low range.
2. The last few days downwards have been on relatively light volume over the holiday period and have retraced less than half of the rally from the lows after Yellen's 'patience' speech.
3. There is an open breakaway gap below created on the day following Yellen's speech between 2011.00-2026.75. The next composite HVN below is at 2029, 50% of the Dec swing move is at 2025.50 and 2023.50 is a composite LVN to watch for rejection and possible reversal. Acceptance through 2023.50 would increase odds of the gap being filled.
4. Friday left a prominent POC & VPOC. Longs will need to push through these look to regain last Wednesday's low and force a short covering rally back into Friday's overnight trading range.
5. If pressure continues on the downside short term, Friday's value area low and top of the buying tail are the main defence spots for longs. If support fails to hold we could see a swift move towards the gap zone and confluence of levels.
It's a light start to the week on the economics front. Friday has the main event with the employment report. Uncertainty is increasing in the US about timing and pace of rate rises in the wake of the headline GDP growth and employment numbers, the continuing strength of the Dollar, low Oil prices and the fact Europe is in for another rough ride this year in many countries with the ECB expected to massively increase it's balance sheet are just a few of the things which are likely to spike volatility this year.