ES review & plan
A low volume beginning to the week with just 1.1m contracts trading and only 2.99bn shares trading on NYSE. The early attempt to hold above the overnight high and break through Friday's high failed, leaving a weak top at 2113.50. Once the high had failed, weakness set in and there was a push into the gap.
The sell-off in the bond market took hold again after the brief recovery at the end of last week, which in turn is putting pressure on equity markets globally as yields continue to rise. This continued overnight beginning with a 10 year JGB auction seeing the lowest bid-to-cover since 2009 which saw yields spike globally and the Bund head back towards the high from last week.
Overnight the market has been heavy and is short with the range on ES currently 2079.25-2101.00 on higher than average volume, versus settlement at 2097.75. The market is likely to open on a significant gap lower, and gap trading rules apply (as per Jim Dalton).
The main expectation today is for an initial push higher to attempt to fill the gap but for sellers to regain control at resistance zones (see below). I'm watching ZB closely for further weakness or a turnaround.
US JOLTS are due at 9am CT and plenty of headline risk regarding Greece continues.
ES review & prep
Despite Friday's big pre-market move after the NFP, volume was just 1.3m contracts and 3.4bn shares on NYSE. There is a RTH range gap from Thursday's high at 2088.25 to Friday's low at 2102.50.
Value on Friday built above the overnight high and failed to break back below it after the first half hour showing buyers were firmly in control, though they failed to take out the poor high from May 4th.
Longs will want to hold above single prints from Friday or risk liquidation from weak holders and see an attempt to push through and into the gap. Overhead the contract high is in striking distance if the market can hold above Friday's VPOC at 2110.75.
Overnight the market has had a muted reaction to a further rate cut by the PBOC. The range is 2105.25-2110.50 versus settlement at 2108.50 on relatively light volume. There are no major economic data points today but the Eurogroup meeting today regarding Greece's creditor negotiations is the major market focus.
ES review & plan
Yesterday I mentioned that I wanted to see support in the bond market after the big sell-off to stop the weakness in the ES and to not want to sell rallies. We got that in spades with a 3 point bounce off the lows in ZB yesterday at the same time the German Bund went through a potential selling climax with yields spiking dramatically, before big buyers stepped up to support it and rally it hard. If we see the bond markets stabilise and rally further, this is supportive to stocks.
The daily chart shows the attempted break down through the lower trend channel has been, temporarily at least, halted. Volume overnight yesterday was above average with increased activity in the European session due to the strong sell-off there.
Yesterday opened just below the prior settlement and ranged inside the prior value area early on. Once there was acceptance above the overnight high buyers pressed the shorts to cover above the 2084.00 pullback high from Wednesday. Internals were not strong, however, and cumulative delta remained negative all day. The afternoon pullback to 2080.50 found it's way back to the wide POC to settle. Value was left overlapping higher, the high left was poor and there remain single prints from Wednesday to test.
Overnight the bond market continued to rally and the ES range is 2084.00-91.25 versus settlement at 2084.25. The employment report at 7.30am ct is the usual main event and key driver for today. The lower than expected ADP number yesterday is a clue we may see NFP at the low end of estimates. Any signs of employment weakness is going to push back rate increase expectations temporarily and probably see a rally in bonds and stocks, and vice-versa. I'm using the support and resistance zones in context of the market reaction and internals.
ES review & plan
Yesterday opened within the prior range and rallied through the overnight high, but was swiftly rejected and there was a very aggressive sell-off through last Thursday's range. There was a decent bounce after testing last week's low back up to prior day's VPOC and settlement where sellers regained control. After balancing for a while there was a push through the April 17th low and the market then rallied back into the POC/VPOC for the close. The market had already dropped 20 points or so before Janet Yellen expressed her views on potential dangers in stock market valuations. Volume was 1.7m contracts and 3.8bn shares traded on NYSE.
Bonds (ZB) took out a major swing low yesterday and have continued their sell-off overnight. In Europe today, the German Bund has had a big move lower pushing yields up to 0.79% at one point, a 20bps jump on the session and nearly 75bps move in 3 weeks.
European equities are sharply lower which has pulled the overnight range for ES lower to currently 2057.00-2077.50 versus settlement at 2074.25 on above average volume. Until we start to see support in the bond market I'm expecting further weakness and for rallies to get sold.
Key zones for today are:
Resistance: 63.00-64.50, 70.25-72.25, 77.00-79.00, 81.75-83.75, 92.00-93.75
Support: 51.25-53.25, 25.25-47.75, 30.50-33.50
ES review & plan
Yesterday's sell-off saw a lack of longer term participation it appeared as volume was just 1.6m contracts in the 30 point range and 3.8bn shares on NYSE. Following the open and fill of the range gap, the rally higher was rejected at prior settlement which was an early warning sign. This was more likely short term liquidation driving the move, particularly once the 2096.00 level previously discussed was broken. This would have given confidence to shorts to push the downside.
The downside looks incomplete after the poor low left yesterday and a test of last Thursday's VPOC and settlement are the next targets, followed by a test of the swing low. The profile left yesterday has many anomalies to revisit so a move back up to the 2095.50 composite HVN and 2096.00-96.75 area is also likely, which could bring in more selling. Acceptance back above there would put major pressure on shorts.
The sell-off in notes and bonds has continued. Interestingly in the spring of 1987 bonds began to drop aggressively from near their highs as a 6 month warning signal to the stock market while it continued skyward prior to the crash. Yields were obviously much higher then but it's likely that if there is going to be a major correction in stocks, bonds will be a leading indicator.
Overnight the range has been 2081.25-2092.50 on slightly increased volume versus settlement at 2084.00. My main expectation for today is for two sided trade within yesterday's value and for a slight push lower.
Resistance Zones: 95.75-97.25, 02.50-05.25, 09.25-11.50, 14.75-16.25, 18.00-19.75
Support Zones: 88.25-89.75, 83.75-82.25, 78.00-79.00, 70.25-72.25, 64.50-67.00, 59.00-60.75
ES review & plan
Yesterday's RTH session was in a 9.5 point range, formed in the first hour which unusually wasn't broken. Total volume on the day was just 1m contracts and only 3bn shares traded on NYSE. However, there was a high concentration of trade between 2110.25-2111.50 where 45-50,000 contracts traded per tick, which may be an important area going into today. Settlement was just under at 2109.25.
There is a range gap between yesterday's low (2105.50) and Friday's high (2102.50), and a poor high left yesterday. There is still no excess at the all time highs so odds are this will be revisited. If the market trades down through the gap and breaks through the 2096.00 breakout point from Friday, there is risk of further liquidation into last weeks range.
The overnight range is currently 2104.50-2111.75. The path of least resistance remains to the upside but buyers will need to hold above yesterday's VPOC at 2111.50 to force more shorts out and challenge the all time highs again. If that fails we would likely see a move back down towards the composite high volume node at 2100.00.
ES review & plan
Early trade on Friday ranged between the 2088.25-89.75 to 2095.00-96.50 zones, but sellers failed to have any momentum to the downside. With value building higher and shorts trapped at the upper zone, the break higher accelerated as shorts were forced to cover. There are two distributions left on the day split between 2096.00-96.50. Volume was only 1m contracts and 3.4bn shares on NYSE, a big drop from the prior day. The settle at 2101.50 was also the VPOC on the day and the VPOC from Wednesday. Longs will need to hold the upper distribution range or risk seeing a drive back through the lower range and revisit the naked VPOC and anomalies from Thursday's profile.
Overnight the market has drifted higher and is net long with a current range of 2098.00-2107.75. Bonds continue to sell off and the dollar index has regained some of last week's losses. There are no major economic announcements due, but Chicago Fed President, Charles Evans, is speaking on the economy and monetary policy at 11.25am ct.
The short term trend is higher so a push into the 2107.75-09.25 and 2111.50-13.00 zones is possible as the hunt to flush out shorts continues. Failure at the initial zone could see a move back towards the high volume node at 2100.00 and acceptance below 2096.00 could see more aggressive liquidation of weak longs. The 2095.00-96.50 support zone is also a short term bull/bear zone.
ES review & plan
It was clear from the elevated volume overnight yesterday that the market was setting up for a break from balance one way or the other. The total volume on the day was 2m contracts and 4.5bn shares traded on NYSE, a big increase on the average we've seen as longer timeframe likely got involved.
The early rejection of prior value and negative market internals supported a balance breakout to the downside. The attempted break back into the prior range after the initial balance low saw an aggressive short covering rally but this ran out of steam with internals clearly still negative. There was consolidation under the overnight low and then an aggressive liquidation break. After the low was in there was a rally back into the close to settle at 2079.00.
Value was left clearly lower on the day and still imbalanced for further downside in my view unless the market can hold above yesterday's prominent POC at 2088.75, which is back within Tuesday's range. The anomalies in the profile and VPOC at 2079.00 are areas to revisit during RTH. Acceptance under there should see a push lower to test the April 17th swing low at 2064.50.
Overnight has been light in volume with Europe on holiday. The range is 2080.50-2088.00 currently. ISM manufacturing is the main number out this morning at 9am ct, which has been trending lower for the past few months. Prior was 51.5, consensus is for 52.
I'm looking for a move off the 2088.25-89.75 resistance zone back down through yesterday's range. Above that zone there's good potential for a rally back into the 2095.00-96.50 zone before sellers could regain control again.
ES review & plan
Value overlapped lower after a balanced two-sided session before and after the POCM statement. It appeared to be day time frame in control once again after the early high reversed off the prior VPOC. The failed break above this late in the session saw aggressive selling through to the other side of value. Internals were weak generally, in terms of cumulative delta and advance/declines. Volume was higher on the session at 1.7m contracts and 4bn shares on NYSE trading. A move away from either side of yesterday's value area could see a decent directional move, particularly on the downside.
There has been a big move higher in the German Bund yield over the past couple of days, which has driven the EURUSD sharply higher and seen the Dollar Index drop sharply. US notes and bonds have also been selling off sharply with the yield jump in Europe, even in the face of the very low GDP number yesterday. There has been a decent bounce off the lows overnight
The very low volume above the 2105 area is evident below on the composite volume profile. Until longs can hold above that level, I have a short bias. There are notable high volume nodes at 2095.50 and 2100.00, where trade may slow down around. If we see a break lower, the open globex gap between 2076.50-78.50 and prominent naked POC/VPOC at 2075.25/74.50 become the next major targets. A move and hold back above 2107.00 could see rapid short covering and put the highs back into focus.
The overnight range is currently 2090.25-2102.00 on above average volume with settlement at 2099.00.
ES review & plan
The market was short overnight and there was some inventory correction going into the open. The brief move higher reversed at the prior settlement and the break lower was accelerated by emotionally driven selling on the back of news reports regarding the capture of a US boat by Iran in the Straits of Hormuz. As is often the case with a fast liquidation move, the resulting bounce can be equally aggressive. One thing you can rely on with headline grabbing news algos is an over-reaction more often than not as other momentum driven systems get triggered, and then find responsive activity to bring things back into balance.
Value was left slightly overlapping lower leaving a long buying tail between 2088.25-2093.50. Acceptance back in that zone would be bearish. The late move higher yesterday broke back into the upper distribution from Monday, above the pullback highs where shorts would be trapped and the prominent POC/VPOC from Friday at 2011.50.
Volume was 1.4m contracts and 3.5bn shares traded on NYSE.
Overnight the range has been 2106.00-2112.50 versus settlement at 2112.00. GDP for Q1 is released at 7.30am ct and Pending Home Sales Index at 9am ct. The FOMC statement is released at 1pm ct which will be closely watched for it's forward guidance, as the market is currently far more dovish in it's pricing than the Fed's dots forecasts are implying. Any hint that rates could move up in June or is generally more hawkish would likely see a major sell-off in STIRs, notes and bonds, stocks & gold and a rally in the US$.
The 2087.50-89.25 zone was tested again yesterday. If there is a strong sell-off following the Fed announcement, the odds of this holding again are reduced and the 2081.75-83.75, 2072.50-74.50 then 2064.50-67.00 zones come into play. Acceptance above the overnight high puts new highs back on target and the next major measured move at 2125.25 (161.8% ext. retracement of Sep '14 high to Oct '14 low).
We're likely to see two-sided trade ahead of the Fed announcement, barring any major GDP shocks, with the support (green) and resistance (red) zones where we could see responsive activity, in line with context and market internals. Notes and Bonds have continued their sell-off overnight.