ES review & plan
Volume remained low despite the sell off with 1.2m contracts and 3.4bn shares on NYSE trading. The biotech sector led the way, down 4%.
ES opened out of range and closed the range gap quickly, then failed to hold above the overnight high on the second attempt. Value was developing higher early on but once the market broke below the pivotal POC from Friday it was a warning for longs and the bulk of trade ended up below the overnight low and VPOC finished below Friday's low, well inside the prior range again.
Case Shiller Home Price Index at 8am ct and Confidence at 9am ct are the main data points today, with the Fed beginning their meeting. Overnight the range is currently 2098.75-2105.25 versus settlement at 2104.75.
The move lower is heading towards the composite high volume node at 2095.50. Failure at this support zone could see a further push through last week's range. The first hurdle for longs is the late pullback high at 2105.50, then the cluster of pullback highs between 2107.50-09.50. A break above there should trigger a short covering rally, but the day timeframe bias is with the shorts below that area.
ES review & plan
Friday was a low volume day with under 1m contracts trading and just 3.3bn shares on NYSE. The early test of the bottom of the upper distribution from Thursday found responsive buyers and left a poor low. The prominent POC at 2111.75 (also settlement) and VPOC at 2111.50 is an important pivot area for today. There is no hard resistance above, just measured moves and fib levels. A break of the poor low from Friday could see a liquidation break to test the range from last week.
Overnight the market has drifted higher with a range of 2108.50-2118.00. There is the PMI Services at 9.45am ct and Dallas Fed manufacturing Index at 10.30am ct. With the FOMC meeting tomorrow and announcement on Wednesday, it's likely to be fairly subdued ahead of that, although any major surprises from Apple's results after hours today will drive direction. Unless we see failure below Friday's low I don't see any reason to be looking for shorts and will be leaning on support zones to go long confirmed by order flow and internals.
ES review & plan
Wednesday's bullish turnaround and movement of value higher left a series of weak highs which increased the odds of an imbalanced move higher, as mentioned in yesterday's plan.
The first couple of hours of trade built volume in the upper range of Wednesday before the break out move. There were three distributions on the day, with the two above the breakout forming around 2107.25 and 2111.50, split by a low volume node at 2109.00. There are single prints between 2103.75-2105.50 which longs will want to avoid trading back through for continuation.
Overnight the range is 2103.00-2113.25 versus settlement at 2107.00 There has been responsive buying from the breakout area and assuming this holds we should see higher prices. Trading back through the overnight low could see a retest of the high volume areas around 2100.00 and 2095.50.
Above the current high the next key measured move I see is at 2132.00, then 2159.75. These are the 127.2% and 161.8% extended retracements of the 2110.50 high on 25th Feb to 2030.75 low on 12th March, the range we have been trading within since. The major long term 161.8% fib of July '07 to March '09 is at 2156.00.
ES review & plan
Yesterday's overnight range had a sharp move lower to the top of the single prints from last Friday and then rallied rapidly higher into the open. Opening within the prior range there was a brief test higher to the prior value area high followed by an auction lower into the weak structure below and failed to follow through underneath Monday's low. The failure to accept below there caused a rapid short covering rally and then eventually broke the overnight high building volume and value higher on the day. However, as is the case currently, volume overall is low at 1.1m contracts and 3.3bn shares on NYSE.
The all time high looks highly probably to get taken out with the several weak highs that stand in the way. There are still areas below which have not been repaired or tested, but the bulls have the upper hand currently and is the path of least resistance it appears.
Overnight the range is 2087.50-2100.75 versus settlement at 2100.25. Today's economic figures are here.
I'm expecting a test lower but responsive buying to step in to take out the weak highs and target the contract high. Acceptance below 2087.00, however, could see a larger liquidation back through last Friday's range.
ES review & plan
Yesterday's overnight extension move higher was rejected quickly after the open and the gap was closed, leaving a long selling tail. Volume was low again at just over 1m contracts and 3.2bn shares on NYSE. Rallies were sold every time and the overnight low was eventually taken out with a brief break into the single prints from Tuesday stopping a tick above Friday's high. Mechanical short term traders dominating once more.
Overnight we have seen a break lower through the weak RTH structure of single prints, triggered by weakness in the UK and European indices. There is still a gap from the globex opening this week between 2076.50-78.50, so we may see an attempt to close this. Beyond that, the naked POC/VPOC from last Friday is the initial downside profile target, with the 2072.50-74.50 being an important support zone to hold above for longs. Below this, the bottom of the current range at 2064.50 is next in the sights.
If buyers step up above the bottom of the single prints from last Friday we are likely to build value within this weak structure area today. As stated in yesterday's review: "Short covering can weaken the market as prices move rapidly away from where longs want to enter. The profile between 2089.75-80.00 is vulnerable and would benefit from filling in for a stronger rally to hold."
Existing Home Sales is the only major US data due at 9am ct and large cap earnings from FB, KO, T, QCOM, BA, EBAY & MCD.
I'm expecting a test of the now resistance zone at 2087.25-89.25 and potentially looking to fade that for a move down into the 74.50-76.50 support, or at least to close the globex gap. Acceptance back above 2089.25 invalidates that and puts the upper resistance zones as long targets.
ES review & plan
One of the main questions I've been taught to ask myself before the open is who's in control. Obviously this is done on a best guess basis but the action and volume gives tells to help make an assessment.
The action on Friday showed a market getting too short and covering back into the POC for the close.
The overnight move yesterday pushed through the pullback highs from Friday leaving shorts trapped. Yesterday's open briefly dropped to one tick above Friday's open and reversed, fuelling a short covering rally and indicating that again short timeframe were dominating the action. The overnight high once broken became support after the range gap was filled. The early high matched Thursday's initial balance high but fell just short of the VPOC and cHVN at 2098.25.
There was aggressive selling as seen in a steady drop in the cumulative delta all day after the high was in and it was clear there was a lot of buyer absorption holding prices in a narrow range, likely shorts covering. Volume was just 1.1m contracts and 3bn shares on NYSE.
Short covering can weaken the market as prices move rapidly away from where longs want to enter. The profile between 2089.75-80.00 is vulnerable and would benefit from filling in for a stronger rally to hold.
Overnight the market has continued higher with a range currently of 2089.25-2105.25. The nearest resistance and support zones have been tested already and today I'm looking at response at these zones to confirm who's in control still.
ES review & plan
The weak sentiment going into Friday saw a large move lower leaving a gap from Thursday. There was consolidation for most of the morning trade following the big move and the afternoon move lower was quickly rejected at the swing low test from April 7th. There was a late short covering move back to the POC as the market had got too short in the day timeframe. Volume was 1.8m contracts and 3.6bn shares on NYSE.
For longs to regain control there will need to be acceptance above the morning pullback high from Friday (2078.00)or there could be rotation lower to test the day's range low.
Overnight the market has been higher following a cut in the Chinese reserve requirment ratio just a couple of days after the Chinese regulators tightened up rules on margin trading.
The range is currently 2078.50-2089.75. The pullback low at 2081.50 is an overnight support level to watch.
There are no major US data figures due today.
The most likely scenarios today I'm expecting are:
1. Break overnight low and find buyers around Friday's settlement and rally to close the gap.
2. Hold above the overnight pullback low and rally to close the gap
3. Range trade between Friday's VAL and High.
4. Test overnight pullback low and rally through gap towards Thursday's POC and composite HVN at 2098.25
ES review & plan
Going into the open yesterday, the market had been weak overnight. The attempt to fill the gap did not have enough selling pressure and once back within the prior day's range the action was choppy with a drift higher. The break through Wednesday's POC and the overnight high was short lived. Value was left overlapping lower on the day.
The overnight range is currently 2082.25-2101.75 on higher than average volume versus settlement at 2100.75. There was responsive buying at the bull/bear zone but inventory is net short with cumulative delta around -17k and sentiment weaker. I'm expecting further weakness after an intial bounce and will be looking to fade the resistance zones if internals support it. If the overnight low is broken and there is acceptance below, there is a strong likelihood of a sell-off to the lower support zones. However, if there is a correction to overnight inventory and prices move back above 2098.25, there is good potential for a rally to all time highs given the two back-to-back poor highs.
ES review & plan
The pre-market rally yesterday trapped shorts and the gap at the open was not filled. The high from Monday became the next target and the poor high that was left was rejected at a composite low volume node. This appeared to be weak longs liquidating. The volume was low at 1m contracts, though NYSE volume was up at 4bn shares, but this is likely a function of earnings season activity.
Longs will want to hold above the prominent POC from yesterday or there is a good chance the gap is filled and Tuesday's POC revisited. The overall context is still bullish and the 2087.25-89.50 support zone is my preferred area to look for a long with order flow & internals supporting or showing a divergence.
There are Housing Starts, Jobless Claims (7.30am ct) and the Philly Fed Survey (9am ct) to add to the mix today. Overnight so far has been weak with the inventory short versus settlement at 2099.75.
Expectations for today are either:
1) We fill the gap and test Tuesday's POC before moving back to yesterday's POC
2) We fill the gap and fail to find support and trade back into last week's range
3) We fill the gap and immediately rally higher through yesterday's POC
ES review & plan
Following the disappointing economic data yesterday there was some give back into the range from last week. The 2082 area still is an important one for longs to hold above. Acceptance below here again increases the likelihood that we see a larger liquidation.
Value was left overlapping lower relative to last Friday & this Monday, but found support within the prior days range. The overnight range is currently 2087.25-2097.00 versus settlement at 2091.00. There was no change from the ECB and the press conference with Mario Draghi is at 7.30ct and then Industrial Production is due at 8.15ct.
The bigger picture remains bullish and expectations for today are possibly:
1. The market tests yesterday's POC/VPOC and finds support and continues higher.
2. The market gaps higher and does not fill the gap and continues higher to test Monday's high