Thursday Prep
From yesterday's prep: 'My main expectation is for sellers to step in at the 73.00-74.75 IR zone and for trade to churn between the IR zone and the short term bull/bear zone (61.50-64.00) ahead of the FOMC minutes later today. We may not see any directional conviction until either of those zones is broken with sustained momentum, volume and market breadth.'
We did end up reacting at both zones; the first two at IR were accompanied by weak TICK momentum, supporting a fade of the zone. The move down into the micro bull/bear zone was after the minutes. TICK momentum was negative but not overly so. Also, the advance/decline was sitting steady & positively around +600 which didn't support continuation of the down move.
The market profile above shows how there was a break either side of the initial balance. When there is a wide POC in the middle of the IB and both sides are broken, the chance is greater that price moves back towards that POC as we saw into the close. The FOMC minutes failed to ignite a move through either zone, so for now price remains within this composite high volume area.
Overnight so far the market has remained in the bottom half of yesterdays range and has been trying to press lower, though holding yesterday's RTH low currently. The zones remain the same as yesterday, though clearly the more times a zone gets tested, the weaker it gets. The current pace of the summer market requires even more patience than normal.
The daily chart below includes monthly volume profiles plus the composite. The monthly trend remains bullish, however, the daily moves have now flattened the upwardly trending 20 day sma and it is holding below it after failing to push above the edge of the upper volume distribution. A move through yesterday's high with enough strength will put the squeeze on shorts and make a challenge for the high again. A lack of buying interest could see a break lower again, possibly to retest the high volume 35/36 area. The contraction in daily ranges over the past few days may continue for now, but looking for a decent move soon and a sell-off is likely to be jumped on by hedge funds in my view. A squeeze to the upside I see petering out with low volume. We shall see!
Zones for today:
Wednesday Prep
A slow, low volume session balancing at higher prices within initial support but failing to re-test the overnight high. The 60.50-61.50 IS zone was tested several times with underlying stock momentum and breadth weak, but it still managed to hold.
Settlement was at 2463.75, 1 tick above the RTH VPOC
Overnight so far the market has squeezed higher, with a range currently of 2461.50-71.25, and moving higher. My main expectation is for sellers to step in at the 73.00-74.75 IR zone and for trade to churn between the IR zone and the short term bull/bear zone (61.50-64.00) ahead of the FOMC minutes later today. We may not see any directional conviction until either of those zones is broken with sustained momentum, volume and market breadth.
Zones for today:
Tuesday Prep
The 'gap and trap' move yesterday left a classic P shaped profile, associated with a short squeeze. Internals stayed bullish for most of the session. As stated in the prep, the 60.50-61.50 zone was a key area for sellers to defend or risk a squeeze higher to the breakdown points from last week.
Buyers remained dominant and responded on a retest from above of the 61 area. That stays a key area for the day ahead.
Overnight the move has continued higher as shorts continue to get trapped and squeezed. The range is currently 2462.50-73.25. The IR/IS zones may contain trade today as this is within a composite high volume area. However, if either breaks it could give directional conviction to a move depending on underlying internals.
IR zone: 2473.00-74.75
IS zone: 2460.50-62.50
Monday Prep
Friday's RTH session balanced within the lower half of the prior day and managed to test and hold the bull bear zone at 35.25-36.75 after first hitting the initial resistance zone for a reversal. A break through the first hour high made the chance greater for continuation, but there was not enough strength behind the move and sellers stepped in to each rally. The late sell-off left a poor low at 2436.00
Price settled at 2440.00 on volume of 1.6m.
Overnight equity markets have been bid with Europe up over 1%. The ES overnight range is currently 2441.50-53.75, having been on a bullish trend since the open. Potential for a large gap on the open above settlement and Friday's high traps late shorts. .
The 60.50-61.50 zone remains very important for sellers to defend or we may see a scrambling to cover by shorts above there. The monthly trend does remain bullish, however, the excess seen on the daily all time high and subsequent reversal does look like an intermediate term high at least. The impulsive move lower last Thursday has left a wide range that the market's still in so expecting two sided activity within that range. Will be monitoring closely the market internals and order flow as prices test zones.
Zones below for today
Friday Prep
From yesterday's prep: Further pressing into the 61 area could see a move to test the 57 swing low. If that breaks sellers will have control and I'd expect an attempt to move down to the 35.50 HVN if there's enough participation behind it.
We got a quick rejection of higher prices after the open at 61.50. The weak internals and heavy volume helped prices push easily through the 57 swing low. Every pullback was quickly sold and trend down day conditions saw prices hit 35.75 just before the close.
The split profiles above show how each 50% pullback has been sold on the way down.
Today's zones below. I'm using 35.25-36.75 as a short term bull/bear zone.
Thursday Prep
Yesterday's open at 63.00 gapped below the prior day's low and close and the initial drop into initial support was bought and the range gap was closed. Sellers stepped in at initial resistance and there was an attempt to push down into the key 57.00-58.75 range extreme support. The market reversed 1 tick above the prior day's low and left a buying tail in the first 30 min period. Extension higher above the initial balance increased the likelihood of continuation higher, though underlying stock momentum was weak for most of the session.
The last hour was strong with a 10 point rally closing near the high at 73, just above the prior day's 72.75 close.
A look at the RTH split profiles above shows a textbook type pullback after an impulsive move lower with a 50% retracement of the move and an A-B-C swing corrective swing of equal lengths.
Overnight has sold off from the open back down into the low volume edge of the current range. I've highlighted the range and balanced volume distribution. Further pressing into the 61 area could see a move to test the 57 swing low. If that breaks sellers will have control and I'd expect an attempt to move down to the 35.50 HVN if there's enough participation behind it.
On the upside, the 66.75-67.75 initial resistance zone is key for short term longs to break and hold above. If they can then a retest of the overnight high and potentially to the 77-78.25 zone. However, if buyers can't break IR then I'm expecting a retest of yesterday's lows and potential bearish break below 57.
Today's Zones:
Wednesday Prep
We finally got a breakout of the recent range which led to a squeeze higher through the prior all time highs. The market stalled in the 86-88 area accompanied by mainly negative TICK momentum. The squeeze higher had left many single prints on the profile and along with threatening rhetoric from Trump towards North Korea, prices quickly collapsed through the hot air that lifted them.
The merged profile below shows the recent area of balance. The directional move away from value yesterday went straight down to the low of the balance range after making new highs. The bounce off the 61.50 area saw sellers step in just ahead of the value low at 68, and until prices can move back inside that value area conditions remain neutral/bearish.
The bottom of the current range is at 57.00 which I would expect to get tested. However, if we don't see further weakness to push into that level, overnight shorts will be trapped above the 68 area.
The current range overnight is 2459.00-70.50. We could be opening on a range and settlement gap lower - prior low at 67.50 and settlement at 72.75.
Expecting rallies to be sold - a break through 68 though could lead to a squeeze up to yesterday's close at 72.75 where I'd expect sellers to step in. However, that is the high volume area of the recent balance so trade could be choppy holding there.
With lack of further shock headlines we may see an attempt lower into the 57.00-58.75 zone be bought up and get a move back into the month's vpoc at 72. If we sell off and fail to get back above the 61.50 level then I'd look for further weakness possibly down to 51.50-52.25 and 47.25-48.00 zones.
New zones for today:
Tuesday Prep
Yesterday finished with the lowest volume of the year with just 586k trading. The IS zone was touched a couple of times and held followed by a slow climb to the IR zone which was briefly broken.
There is no excess left on the day at either end as demonstrated by the poor high and low.
The longer the market continues to trade in the current balance area, the greater the move out of it either way is likely to be. Longer time frame bias remains bullish and short term is neutral/bullish, with the path of least resistance to the upside to new all time highs. However, unless we see increased volume alongside a directional move, they could be false starts.
Adjusted zones are shown below on the 60 min. If we do see a breakdown and the current month low is taken out, I would expect to see responsive buying at the 60.75-62.00 zone where the low volume area of the current balance is.
IS zone: 71.75-73.00 IR zone: 77.25-78.25
The overnight range so far is 73.50-77.50 versus the settlement price of 77.50
The merged TPO and volume profiles below show trade since the sell-off from the all time high. For any directional move we shall need to see acceptance above or below this value area (68.25-74.75) or the chop is likely to continue.
Monday Prep
Overnight has traded in a narrow range between 2472.00-77.50, having retested the Initial Resistance zone from Friday and pulled back towards the close.
Until we see a break of either side of value of the current range, trading is likely to be choppy inside value (as shown in the Friday review)
Zones for today shown on the 60 min and renko charts below.
Friday Review
Friday's strong employment report led to slightly higher prices though most of the impact was seen in bonds and the dollar.
The early spike higher above the bull/bear zone into IR was not accompanied by strong momentum and broad market strength. Instead there was a clear bearish divergence in the market internals.
A liquidation break then followed down into the prior day's VPOC. The IS zone should have been adjusted from the prior day to include that which was a poor miss on my part.
All the action happened in the first hour and that would've been a good time to call it a day as was painfully slow for the remainder of the session.
The merged profiles below include all trade following the sell-off from the all time high on July 27th.
A value area has formed between 2468-2474, with 73 trading the most volume (VPOC) and 72.75 where most time has spent (POC).
Until we see a break outside of value and rejection on retest with accompanying directional force (i.e. volume, strong internals etc.), trade is likely to stay choppy.
We still have a poor all time high with no sign of excess yet.
The daily chart below has monthly volume profiles showing the progressive shift higher in value, currently holding above the prior month's VPOC at 68. Once that area breaks a lot of late to the party longs will be trapped offside which has potential for a strong liquidation break. A move higher will continue to trap and squeeze the latest shorts until we get buyers giving up.
Next weeks key US data is highlighted underneath.
