Review & Plan Feb 23rd
Yesterday's regular trading hours (RTH) saw the lowest volume and range of the year, with the majority of the up move happening during the European morning session. The rally from the February lows has left very weak structure in it's wake with three RTH range gaps on the way up. If there is going to be strength in this rally, then the market would have a stronger footing by filling these areas and see initiative buying step in.
As you can see on the RTH chart below, the market could pullback 61.8% of the move from the low to yesterday's high and fill all gaps, as well as cover 6 naked VPOCs on the way down. This could still potentially set up for a stronger rally to move back up towards the 1980 area, where the market broke down in December. This isn't a prediction but just a potential scenario to consider if the market sells off and looks really negative. However, if the market starts to accept and hold below the 1855-60 area then the chances are that higher time frame longs have failed possibly.
Looking at the daily Globex chart, which has a customised volume profile drawn from the August 24th '15 low to date, we can see that the market is currently trading above the 1920 daily VPOC of this range and is aggressively trying to break above the Jan 13th swing high at 1946.50. If this succeeds in the short term then we are likely to see a continuation of the short covering type action seen in the past week or so. The more shorts that cover will leave less potential buying power, weakening the rally and setting up for sharp drops.
Overnight the range is currently 1924.50-1936.75 versus settlement at 1936.25.
So far this month the mean averages are:
Initial Balance: 17.25
RTH Range: 28.00
Globex Range: 38.25
Overnight Volume: 462,000
Total Volume: 2,245,000
The zones that I'm using today are below. If the market fails to break through the 1937-39 zone then I would expect sellers to attempt to push down into the zones below. If buyers still have strong control then I would expect the 1921.25-23.25 zone to be defended aggressively.
Review & Plan Feb 22nd
Friday was the second lowest range of the year and lowest volume of the year at 1.59m contracts (second lowest on the NYSE at 4.122bn shares).
The last three day's balance will be a pivotal area for this week in my view. The market has moved far and fast from the lows leaving a couple of gaps in regular trading hours. If the market fails to hold above the high volume area of the past few days then there's a danger to longs that gaps will be filled below. I'm using the Feb 17th RTH low at 1904.00 and Friday's value area low at 1907.00 as my bull/bear zone to start the week.
Overnight has been imbalanced higher with a range currently of 1908.25-1938.75. Volume is below average though. The high for the month so far was 1940.00 on Feb 1st. If we see a move above the overnight high to tag that and then fail, I'm expecting a move back towards the naked VPOCs at 1931.00, 1921.00 and 1914.00. Below 1904 I'm looking for the weak low on Friday to break and gaps to fill below.
Zones I'm using today are:
Review & Plan Feb 12th
We saw a new low for the year in the overnight market at 1802.50 yesterday but failed to take out the level in regular hours. Volume was the third highest of the year at 3.19m contracts and 5.46bn shares on NYSE. The Jan 20th low day has the highest volume of the year at 3.91m contracts and 6.33bn shares on NYSE.
Despite the wild swings in the afternoon a balanced profile was left on the day and the lowest close this year at 1824.50. There still remains a gap above to fill and the market is still likely to see sellers step in on rallies while it remains below last week's low at 1865.00. If the market starts trading back inside last week's range I'm going to be cautious with shorts, especially if we see acceptance above last weeks close at 1875.25.
Overnight the market is higher with stocks in Europe. The range currently is 1822.50-1848.50 versus settlement at 1824.50. There is a US market holiday on Monday. The weekly VPOC is 1848.00.
Retail Sales came in at 0.2% month on month vs 0.1% consensus
Scenarios today I'm expecting are either:
1. Hold the 1832.50-34.75 zone and attempt to push above 1855.00 towards the 1863.75-65.75 zone
2. Balance higher between the 1823-1855 area seeing two-way trade
3. Reject the overnight high and attempt to push back into yesterday's value area down to the 15.75-17.50 zone.
4. Accept back inside yesterday's value area and attempt to take out yesterday's overnight low.
Zones I'm using today are:
Review & Plan Feb 11th
Yesterday saw the morning hold the balance breakout and had a push just past the settlement gap from last Friday. There was aggressive selling off the highs and then balancing before a late break lower back inside the prior day's value.
Overnight has seen the selling pressure step up with more bad bank headlines and new crude lows. The range is currently 1802.50-1847.25 and volume at 550k with over an hour before the open.
The regular trading hours low was 1804.25 on Jan 20th and I would expect this level to get run through today at some point with the overnight market making a fresh low. The October 2014 back adjusted low was 1774.25 which would be the next key swing low under 1804.25.
The market is likely to open with a large gap lower. There is a composite HVN at 1811.50 which has given some support overnight and seen rotation around. If this holds then I'm expecting an attempt to close the gap and the resistance zones in red are areas I'm watching closely for potential shorts. Underneath 1804.25 I'm not looking for longs as we could see a serious liquidation move if it holds. 1787.25 would be the initial downside target below (being the 161.8% ext. retracement of the recent swing move
Review & Plan Feb 10th
The market got itself too short overnight yesterday with cumulative delta -25k going into the open. We saw a correction to overnight inventory from the open tagging the overnight low and high in the first 40 mins.
Overnight we've seen huge positive moves in the European financials as Deutsche Bank announced plans to buy back billions of debt and the government has effectively said they'll back them.
The range has extended higher from yesterday, currently 1838.50-1872.00. Janet Yellen's testimony is at 10am EST.
If the breakout from the last two day balance is to hold then key support is the 1852.50-56.75 zone (also the short term bull/bear zone). Failure to hold that area and I'm expecting a rotation through yesterday's value at least down to the 1838.50-40.50 zone. Failure below the 1829.50-31.75 zone and we could see a liquidation move lower so would be cautious of longs below there.
If the market can hold above the 1865.75-68.75, which is back inside last week's range, then the next major target is the high volume node at 1890.00.
Review & Plan Feb 9th
Yesterday's move lower began during the European session, driven by the financials as CDSs in Deutsche Bank spiked due to concerns on their debt servicing ability and credit markets continue to creek. The extended down move during Globex saw the market get very short in the day time frame, which saw an aggressive short covering move in the last hour.
Volume was high at 2.67m on the session and the second highest volume on NYSE this year at 5.6bn shares. It was the lowest settlement of the year at 1852.00 and a new low for the month at 1821.75, not far from the year low at 1804.25.
Overnight the range is currently 1827.25-1856.75, making new lows as I write. Volume is high and cumulative delta is currently around -23k, showing aggressive selling before the open. This is also the sign the market has got very short pre-open, so if we do see a rally back above the overnight VPOC (currently 1835.00), we may see a fast short covering move. However, all longer time frame trends are lower (monthly, weekly & daily), so I'm going to patiently wait for shorting opportunities until things look too stretched to the downside.
Zones I'm using for today are below with my primary focus on short bounces. Above yesterday's RTH high (1855.00) we have a range gap up to 1865.75
Review & Plan Feb 5th - NFP
Yesterday attempted to break above the prior 2 day range but had resistance at the 1918.75-22.25 zone. Unusually neither the overnight high or low were breached. Total volume was 2.25m contracts and underlying share volume on NYSE was high at 5.16bn.
The day finished balanced with value between 1898.50-1911.00 and VPOC at 1904.50
The employment report today will add to an already volatile intra-day market. The prior balance VPOC at 1890.00 has now shifted up to 1906.00 increasing the range from the Jan 26th swing low to date. This will be an important pivot for trade today I believe and I'm setting the bull/bear zone at 1904.25-08.25.
The zones I'm watching for potential support and resistance are shown below. I see the 1849.50-53.50 zone as the strongest potential support area and 1931.00-33.00 as the strongest potential resistance on first test. As always, it will depend on context at the time and momentum/flow into all the zones. The market is in a near 90 point balance area since Jan 26th so am expecting rotational moves until this breaks.
Below the 1873.75-75.75 zone I expect a quick move to the zone below so may look at that as a short on retest from underneath.
The poor high at 1921.75 yesterday also looks vulnerable on the upside for a break through.
Apologies, didn't have time for the video this morning.
Review & Plan Feb 4th
Yesterday was a wild ride from both sides. The expectation going into yesterday was that shorts would take control at the 1908-10 zone down to the low of value of the range last week (1871-3). I certainly hadn't anticipated it happening in the first hour though!
The morning low took out the RTH low from Jan 28th and came back into range. then rallied for the remainder of the session, eventually taking out the overnight high. Volume was high at 2.84m contracts and 5.14bn shares on NYSE.
The added volatility was helped by the big moves in rates and the dollar yesterday. The dollar sold off hard as yields continue to get squeezed with the global currency wars hotting up, which in turn had a positive impact on commodities.
Overnight the market has attempted to hold above last weeks range, which sets the scene for more potential short covering. The distribution areas shown above will be useful today to see who's in short term control. The prominent VPOC at 1906.25 has given support overnight with the range currently 1897.75-1922.25 versus settlement at 1908.50
Bias today is going to be very dependent on the 1906.25-09.00 micro bull/bear. Zones and anticipated moves/reactions below:
Potential Support:
1896.50-98.50 Yesterday afternoon pullback area
1889.25-92.50 Breakout area yesterday/distribution LVN and mcVPOC
1871.50-73.75 mcVAL and pullback area yesterday
1849.50-52.25 Composite low volume area and Jan 26th low
Potential Resistance:
1906.25-09.00 Prior VPOCs and settlement, micro bull/bear
1918.75-22.25 mcVPOC and overnight high
1931.00-33.00 Bull/Bear zone
Review Feb 2nd
Here's the first of my video reviews to accompany my blog, please give me any feedback to help improve it for you to: giles@divergent-trading.com
Yesterday saw an open drive lower and return to the balance area from last week, eventually finding responsive buyers at the VPOC of that range. Volume was 2.09m contracts and 4.44bn shares on NYSE.
Longer term shorts still maintain control below the bull/bear zone initially and the high from Monday (50% pullback level of impulse down move).
Review Feb 1st
ES filled in the thinly traded areas from Friday and buyers had control with a swift rejection of the overnight low after tagging it. Friday's high was broken and some forcing action above there saw responsive selling step in to return to VPOC at the close.
Volume was low for the year at 1.74m contracts in ES though relatively higher on NYSE with 4.29bn shares trading. First day of month cash buyers.
Friday's high and yesterday's VPOC are the short term bull/bear zone for today (1931.00-33.00).