Wednesday Prep
The test lower after the opening swing high was met with responsive buying yesterday. Once back inside the prior day's range the market one time framed higher on the 30 min until the last hour of the day, after tagging the prior day high. Volume was fairly low at 1.3m contracts.
Failure to hold below initial support yesterday keeps the short term bullish bias intact, and only once there is acceptance below there and rejection on a test from underneath does the case for a corrective move increase.
Overnight support - 2204-06
Initial Support 1998.25-00.25
Tuesday Prep
Yesterday was the first full trading session since last Wednesday and we saw an early failed breakout to the upside and then some two-way action defending the 2200 area. Short term sellers put the pressure on in the afternoon which was in alignment with the underlying NYSE internals.
The long-term trend remains bullish but, unsurprisingly, we are beginning to see sellers step in. This now gives us some resistance areas above where sellers are likely to step in again and potential for a small corrective move to at least retest the breakout from the prior all-time high at 2185.00 (back adjusted). A correction would be healthy for the longer term bull move and there are multiple untested prior daily VPOCs which a move lower could target and look for longer time frame buyers.
Overnight so far the range is 2198.75-2206.00 on light volume. 3rd Qtr GDP is due at 07:30ct and William Dudley is speaking at 08:15 ct
Zones for today:
Monday Prep
Friday saw the market open near the prior day's high and push above the overnight high before quickly rejecting and seeing a 'b' shaped profile form associated with long liquidations. However, the selling was not aggressive enough to change the daily uptrend and a poor low was left probably seeing shorts trapped.
A quiet week is expected with Thanksgiving on Thursday, apart from the FOMC minutes from the last meeting released on Wednesday at 1pm cst, though whether anything new will be seen there is doubtful given the continuous stream of Fed speakers recently.
Zones for today below:
2186.75-87.50 Initial Resistance (Friday's overnight high-RTH High)
2182.75-83.75 Overnight Support
2180.00-82.00 Initial Support (Friday's RTH VAL - VPOC)
2175.50-76.50 (1 tick above Thurs open - Fri overnight low)
Main expectation for today is that if we do see an attempt lower, buyers will step in at the support areas above and we see a continuation higher to test and potentially break initial resistance.
If the 2175.50-76.50 zone breaks then we could see some long liquidation but still with the expectation of responsive buyers stepping in at zones below.
Friday Prep
We got the expected move to the 2185.00 high yesterday, though there was no follow through. Overnight initially sold off and then found support at prior resistance and has pushed up to new highs. Bias is bullish on all time frames and the expectation is for continuation higher if we see underlying market breadth and momentum.
Zones for today below (resistance zones shown are measured targets not hard resistance)
Thursday Prep
The bullish longer time frame continues to dominate, though the momentum and volatility has dropped off considerably. Yesterday's balanced narrow range day left value above Tuesday's breakout point.
The 2185.00 all time high (back-adjusted) is the next obvious target for the RTH session having tagged it during the overnight trade on Tuesday. There is no hard resistance above 2185.00, just measured targets.
Value has been building steadily higher over the past week and I would expect strong long term support to step in around the 2147-49 area if there's a break lower. There are also single prints open from Nov 9th between 2142-45.50 which could see responsive buying if we see stops run through the 47-49 zone. If that fails then the long term bullish bias has changed and my next target would be 2125.50, which was the Nov 9th RTH buying tail support level.
The large jump in bond yields and strength of the US dollar since the election has yet to impact stocks, but is a source of cognitive dissonance for the long term bullish stock scenario.
CPI and Yellen's testimony are today's major news items due.
Initial support I have today at 2170.50-72.00, then 65.50-67.50 and initial resistance at 76.50-77.50. Holding above there puts the all time high as next target and potential continuation.
Monday Prep
The overnight gap up is trading in the composite low volume area highlighted in yesterday's note as a key pivotal area for rejection or continuation. The range currently is 2102.75-2112.00, stopping just short of the 2112.50 Oct 28th low which the market broke on liquidation.
The large gap has trapped any shorts holding from the past 3 days and it's unlikely it gets filled today without negative news.
How the market reacts to the 2105.75-07.50 overnight support after the open should give a clue whether we continue squeezing higher into longer time frame resistance or attempt to partially fill the gap, back down to last week's vpoc at 1998.50. This coincides with the short trap area from last week, above the 98-00 zone.
Weekend Review
Friday's early test and reject of the prior low set the morning up for a rally which ran out of steam just below the prior day breakdown and high volume area. Once support eventually broke there was a strong liquidation move retesting the low of the day. The failure of buyers to step into support left a weak close at 2080.00, one tick above the prior day low.
The selling of the past week or so has not been showing too many panic liquidation signs, but has waited for rallies to sell into. This leaves a potential cascade of stops above those distribution zones on a bounce.
Above current levels there is a major composite low volume area, highlighted below. This is likely to be strong resistance on a rally, though if broken on heavy volume I'm expecting continuation of the uptrend and that area to become potential support.
Below is an RTH chart of the late June sell-off and rally after the Brexit vote. The next major swing low to test is at 2059.25 from July 6th. This is hugely important area of support in my view, and If broken on strong volume the expectancy would be to try and fill the gaps below.
This area below is also where volume has been heavy previously over the past 5 years. Failure at the bottom of that CHVA could lead to a challenge of the post Brexit low at 1975.00, also around the 50% retracement of the year low to all time high at 1981.50 (38.2% at 2029.50).
If we get a Trump victory, we're in for a global sell-off in risk assets and surge in bullion prices, I would expect. A Clinton victory could see a big unwinding of protective hedging and short covering rally back into the upper distribution recently broken down from.
Either outcome, it's going to be a volatile, wide ranging week
Friday Prep
Yesterday's continued down move left a double distribution and a market that is getting more short into a support and breakout area from July on the daily time frame.
The 2084-87 area is the initial resistance for buyers to break and until this is done more pressure can be expected on the downside. The market is also getting overly short possibly into the old support areas which makes it vulnerable to a short covering squeeze.
Overnight range is 2080.50-86.75 after the non-farm numbers which is very subdued. Zones for today are below:
Thursday Prep
The broader market (mainly the Russell 2000) was weak from the outset yesterday and the S&P played catch up later in the day. There was a notable disconnect in the NYSE A/D when the market was just a couple of points away from prior settlement and yet the A/D was at -1000.
The extension lower tested a breakout area from July 8th and the weakness remained into the close leaving strong resistance in the 2099-2100 area. This also leaves a lot of shorts trapped above this zone and a squeeze higher is possible, though there are still larger time frame resistance areas above on any pop.
Overnight has seen an initial move lower to the July 7th nVPOC at 2084.00 and a rally to the highs at 2098.75, which is resistance from yesterday.
News overnight has focused on the Pound, which rallied on news of a high court ruling that the UK parliament has to approve the triggering of Article 50 and the Bank of England announcement/statement. US bonds sold off a point tracking the move in UK Gilts.
Zones for today are below. Despite the bearish sentiment and price action of the last week or so the market is vulnerable to a short covering rally if the 2098.75-2100.75 resistance zone is taken out, with sellers likely to step in at the zones above. On the downside, if 2091.00 holds then odds are good that the market tests higher, though if that fails I would expect the overnight low to possibly get re-tested.
Wednesday Prep
The bull/bear zone for yesterday at 2119-21.00 was tested early following a driving move off the open. Once this was broken the trending move lower gathered pace, with market internals supportive of continuation.
The RTH swing low from Oct 13th at 2107.75 was a key level to hold for longs, but this broke easily. The move exhausted into 2091.00 and short covering action left a 5 handle buying tail on the profile.
The boxed area above shows where the bulk of volume and time was spent during RTH (value area levels are of little use on trend days). Given the market has broken larger time frame support, the bias remains negative while price remains below the top of this area at 2108.75.
If we open within the 2096.25-2108.75 area I would expect choppy, volatile trade.
A break and hold above 2108.75 could see short covering up to yesterday's overnight low at 2114.75 and potentially 2119.00.
If 2096.25 fails to hold then continuation lower towards the July 7th open settlement gap and nVPOC at 2085.50 and 84.00 are next references below yesterday's low. The 2080.50-81.50 represents the July 8th Globex low and micro range nVPOC, before the launch into new all time highs in August.
Overnight so far has ranged between 2094.50-2104.50, ahead of the FOMC announcement later today. Zones I'm using today are below: