Monday Prep
Friday's open drive higher would have squeezed late shorts from the prior two days. It also left a long buying tail when through the overnight high associated with a short squeeze. Volume from Wednesday to Friday was 2.78m, 2.44m & 1.65m. If volume continues to drop, that does not give great strength/confidence in the rally. Sellers are likely to defend the breakdown areas heavily from the beginning of last week.
Overnight has ranged between 2378.25-85.25 on fairly low volume. With Trump on tour, anything could happen, though I'm sure he's under major pressure to not go off script. Crude continues it's strength, above $51. Fixed interest has been quiet, though holding the lower yields from the move last week.
Zones for today:
Thursday Prep
Yesterday's FOMC announcement and statement failed to get the market moving significantly, though the tone was bullish following the news. Overnight has moved higher to test the RTH high from Monday and the Globex range is currently 2381.25-90.75, with the market on the back foot following weak productivity and higher than expected labor costs data putting evidence against a rate rise next month. However, if the market can remain above yesterday's RTH high there's little resistance above up to the all time high.
Wednesday Prep
The zones above are still from last Thursday's prep, and the market has remained contained within the initial support and resistance. Range and volatility has contracted ahead of the FOMC announcement today and the primary expectation is for the market to remain balanced within the range until then.
We still have open gaps below to fill but with the market currently balancing at higher prices just ahead of the all time high that may be the path of least resistance first. Depending on the statement, we could see containment within the current range, false breaks or a break either side with volume and momentum. The zones for today are below with minor adjustments.
Thursday Prep
Yesterday's RTH session started with a move above the prior VPOC and squeeze through initial resistance, but buyers failed to push up into the all-time high and instead saw a sharp late morning break which removed the likelihood of further upside continuation and saw two-way action which finally had late longs give up with a break to the overnight low.
Overnight so far the range has been tight at 2381.25-86.50 on low volume, versus settlement at 82.25. Yesterday's afternoon breakdown point and VPOC will be important initial resistance for today. Short term bias for today is neutral/bullish, as there are air pockets below not yet filled.
These are my zones of interest for today:
Wednesday Prep
The pre-market rally had pushed through the 74.75-77.25 resistance zone and opening above here trapped shorts once again leading to a squeeze higher into the next resistance zone and forming a P-shaped profile often seen with short covering. The structure below is getting weaker with another gap higher yesterday, but that doesn't mean the market can't continue this type of move before filling the gaps below. This article shows one of the forces at work in the move higher during this earnings season.
Overnight has so far narrowly balanced inside yesterday's upper range, above the initial spike, between 2382.25-86.75. Holding above the overnight low/top of yesterday's spike keeps the pressure on shorts. If the market fails to push past yesterday's VPOC at 85.25 which may see the market try and close yesterday's gap and test the 70.50-71.50 support. However, the market is in short term bullish mode and we may need a negative news/earnings catalyst before filling the gaps below.
Zones of interest for today below:
Tuesday Prep
Yesterday was balanced as expected, given the large gap. I didn't take any trades in ES as the market failed to move into my zones of interest. An attempt to fill the gap is likely, especially as the move was driven by the European markets all but pricing in a win by Macron in France in two weeks time. The breakout was bullish, though patience is needed to wait for decent trade location for longs. Shorts can continue to be squeezed out on any rally, so we may see continuation higher before a smackdown into the gap.
Overnight the range is currently 2368.25-75.00 and attempting to go higher, on light volume so far. The 74.75-77.25 zone is an area that could be defended by sellers, but a break through there is likely to cause a short squeeze and run higher. Overnight support is at 70.50-71.50 which won't likely be broken if this market is strong.
Monday Prep
The overnight relief rally in equity markets following the first round vote of the French elections has put approximately a 25 point gap to Friday's close currently. This will have trapped many short positions and I would not expect a gap of this magnitude to be closed today without some very negative news. The breakout through the flag pattern formed on the daily chart above puts the all time high back on the radar and short term bias back to bullish. However, it could be difficult to trade today and I'd prefer to see the how the day develops in relation to the gap or continuation move.
The zones of interest for today are below. I'm expecting balancing at higher prices and a choppy first hour or so as the market adjusts for the large gap.
Thursday Prep
Yesterday's inside day turned into a churning session which built value below the overnight low and 'felt' heavy despite stopping exactly at the 100% extension of the initial balance (2337.50), which would indicate short time frame traders were more dominant. Opening inside prior value can lead to the type of action we saw yesterday and sometimes it's best to stay out until the market shows its hand or it's easy to get chopped up.
Trump's afternoon comments about the dollar being too strong saw yields tumble and bonds have broken out of a multi-month range, with yields closely correlated to moves in USDJPY. Headline risk is elevated with the current geopolitical tensions around Syria and North Korea.
Overnight has been weaker in equities with ES ranging between 2332.25-44.00. Notably the selling has been more aggressive with cumulative delta hitting -24k at the low. If we don't see a covering of overnight shorts it could be an indication of more serious selling to come if it breaks the bull/bear zone (31.75-33.50). Earnings from the financials will be a key driver for flows.
Zones I'm using today below:
Wednesday Prep
April range: 2333.25-2375.00 - Inside March range (2317.75-97.50)
This week's range: 2333.25-63.25 - Overlapping lower to last week
Yesterday's downside break saw a liquidation move into the 31.75-33.50 bull/bear zone. Short term this has held as support, with responsive buying squeezing shorts on the rally back into the initial balance.
Overnight has seen a low volume rally from 45.50 to 56.50 and back down to the 47.50 overnight VPOC. Bias is neutral/bearish below 2351.00 (prior settlement). A test of the breakout and pullback areas from yesterday is very possible with 40.50-42.50 my initial support zone. Cautions on longs below there. While the market holds below the past two week's VPOC at 53.25, I would expect sellers to continue to step in on rallies. Between 53-60 is a high volume area and likely to see choppy trade until acceptance above there.
Today's zones:
Tuesday Prep
Opening at 2359.00, there was a brief look higher which failed, accompanied by a weak NYSE TICK and strong notes and bonds. The market one timeframed lower for the next five 30-minute periods, eventually exhausting at 2340.00 and leaving a good low with 9 ticks of excess. A double distribution was left on the day's profile, with the mid-point 2351.00 and settlement at 2356.00 (also the overnight low).
Overnight has so far ranged between 2344.75-55.50, holding below yesterday's settlement and VPOC. I'm using the 42.50-44.75 zone as a key defence area for bulls. If buyers fail to respond enough there, then I'm expecting further weakness to possibly take out yesterday's low and head for the 31.75-33.50 bull/bear zone. On the upside I want to see acceptance above 56.00 for a chance of changing the short term neutral/bearish bias.