Wednesday Prep
The market opened again at the CHVN, 2549.00. After the first few minutes of pushing against this area there was a fast squeeze through there to new all time highs and hitting the 53.25-53.75 zone (127.2% ext. fib of recent daily swing).
There was little underlying follow through after the buy stops had been triggered and the market collapsed on itself, more from a lack of buyers than heavy underlying selling. This move tested the 42.75-44.00 zone (which represented 1 tick below the overnight low to the prior initial balance low). The second test of the zone showed a 1 tick failure of the overnight low and initial balance low which then trapped shorts and eventually led to a move back to the CHVN at 49.00.
The fact that many of these levels are being responded to so much at the moment is indicative of short term players dominating. Volume finished at 1.1m contracts.
The daily profile from yesterday now shows we have excess at the all time high and a series of poor lows and untested VPOCs/POCs. Although the long term bias is still clearly bullish, the risks are increasing of a correction. The downside target for that move would be the 2509.50 breakout point from the end of Sept. However, depending on the strength of any move we are still looking to see responsive buying at the zones ahead of that. This will be market state/context dependent. The FOMC minutes later today and data for the rest of this week are important for market sentiment.
Yesterday's stock moves showed defensives leading the day - not a great sign at an all time high.
Today's zones of interest:
Tuesday Prep
Yesterday's Columbus Day bank holiday volume was unsurprisingly light at just 735k. The market opened at the 2549.00 mentioned in yesterday's prep: A composite high volume node (CHVN) has formed at 2549.00 which may end up being pivotal for direction if that continues to build.
The initial negative price action after the open broke just below initial support and then remained in that zone for most the session until a late liquidation break into the 38.75-39.75 support zone. A prominent POC and VPOC had already formed before that drop, reducing the chance of continuation lower, particularly with overall volume so low. This zone represent the base of the breakout area, just above the open, on Oct 5th.
Overnight so far the range is 2543.00-48.25 versus settlement at 44.00. There's little in the way of data today ahead of tomorrows 10 year note auction and FOMC minutes. We may see some two sided balancing activity within the range of the past few days. The longer time frame remains bullish and short term we're in a more neutral/bullish phase as the market balances ahead of it's next directional move.
I have today's initial support at 42.75-44.00 and initial resistance at 49.00-51.00. It's not a strong area of resistance, particularly as the CHVN is at 49.00 so a build above there will likely lead to another all time high and short squeeze. If, however, 49.00 proves difficult to break then this could be a sign that sellers are trying to dominate. The zones above the ATH are not hard resistance, just measured moves based on Fib extended retracements.
Monday Prep
Friday's reaction to the employment report saw a move lower pre-market, below the overnight support zone. This acted as resistance for the cash session, though we didn't see any meaningful sell-off and the RTH range was just 6 points. Volume remained fairly low at 1.1m contracts and the market settled at 2545.00.
The major data for the week starts on Wednesday with the FOMC minutes, PPI on Thursday and CPI & retail sales on Friday.
Overnight so far the range is 2543.25-49.50, overlapping higher to Friday's RTH range. A composite high volume node (CHVN) has formed at 2549.00 which may end up being pivotal for direction if that continues to build.
Zones of interest for today are below. If the 44.75-46.75 zone holds I'd expect to see a further breakout higher. How that breakout occurs needs to be monitored closely to see if it is likely to fail or not, depending on underlying strength. If that zone fails then we could see some short term liquidation into the 38.75-39.75 zone or potentially the zones below if volume, momentum and the other markets are in alignment (i.e NQ & TF). I'm happy to sit out for now as the upside seems over extended short term and I don't want to short yet against the current multi-time frame bias.
Friday Prep
Opening yesterday within the initial resistance zone at 2538.50, the continuing squeeze higher saw some fast moves mid-morning which left single prints which are marked by the yellow box in the top chart. After this move towards 2450 the session balanced in a narrow range all afternoon. Although overall volume was light, there was a concentration of high volume around the 2449 VPOC, which is now the VPOC of the week having shifted up from 31.75
Until we see a break lower and rejection of yesterday's upper distribution this could just keep going higher. The poor structure from yesterday would be the first area to be repaired on the downside.
The updated zones are below for today. It remains to be seen whether short term longs are going to cash in ahead of the weekend. A break of the overnight balance could lead to sharp spikes in either direction due to trapped longs or shorts.
Thursday Prep
Opening on the top of the initial support zone at 29.75, there was a brief rally towards the overnight high which failed and retest of support. Buyers then pushed up to the initial resistance zone which didn't tale long to pop through, accelerated with buy stops and moving to yet another all time high at 2538.00. The prior resistance became support on a pullback and value built above the prior day's, albeit on very low volume again (943k).
Settlement was at 2536.25 and a prominent POC/VPOC left at 35.25. The market has not taken out the previous day's low since Sept 24th - 8 trading sessions! That doesn't mean that will change today, but when it does we could get what Jim Dalton refers to as the firecracker effect when stops get triggered at prior lows and momentum keeps the move accelerating through more stops.
I said in a previous note that I'd like to see the 2509.25 area retested, which was a breakout point leaving single prints. The launching point of this move was the 2504.75 composite high volume node (CHVN). For these reasons I have 2507.75-09.50 as a multi time frame support zone and 2504.25-05.50 as the short term bull/bear zone. Tomorrow's employment report has potential to be a catalyst for some well needed volatility and daily range expansion.
Overnight so far the range is just 2534.50-37.00, above yesterday's mid and within prior value. Zones of interest for today below. All time frames remain bullish for now and as always real time context and assessment of market state is needed when the market enters any zones. Trying to pick tops can be an expensive fruitless task and buying up here may not give a desirable reward to risk, so no harm in sitting on the sidelines until better opportunities arise at more favourable trade locations.
Wednesday Prep
The slow drift higher continues on falling volume, with a pitiful 836k contracts trading yesterday. Sellers failed to break lower leaving a 1-tick failure after leaving a 4 TPO wide ledge at the initial balance low (IBL).
With initial support holding there was a move up to the overnight high and eventually a break above extending to a new all time high at 2533.00. The Russell 2000 also made new highs, though the Nasdaq 100 is still attempting to regain the high made Sept 1st.
This low volatility, low volume market will not stay the same indefinitely. When most of the shorts are squeezed out and everyone's long, we're going to see a correction as the market auctions lower to search for buyers. The 2509.25 breakout point would be a key area to test initially in my view (see top chart highlighted with yellow box). However, until there's market action pertaining to that, all time frame trends remain bullish.
Today's ADP report could give some pointers towards this Friday's hurricane affected September employment report. Janet Yellen is due to speak later, though is only delivering opening remarks at a conference.
Overnight so far the range is 2530.75-33.25 on extremely light volume (versus settlement at 32.75)
The adjusted zones are below for today. 29.00-29.75 is an aggressive area of support. If we open and move higher to fail at the overnight high then a revisit of yesterday's poor low could see buyers respond in the 23.50-25.50 zone. If there's strong downward momentum, volume and market breadth then this could trigger some short term liquidation into the lower zones. On the upside, 33.50 marks a 161.8% ext. fib level on the daily chart but there is no hard prior resistance just more buy stops getting triggered from recent shorts.
Tuesday Prep
The first day of the month opened at 2518.50, just above the prior day's high. The session continued to migrate value higher and we saw a big beat on the ISM manufacturing number and the best in 13 years.
The pullback from the top of the IR zone was relatively short lived and the bulk of the afternoon session was spent back at that area, before breaking above just before the close and leaving another poor profile high.
Overnight so far the range is 2525.50-29.50 versus settlement at 26.25. No major econ data due today.
All time frames remain bullish for now and I'd be looking for signs of buyers responding on any moves to the green zones. Caution needed if the market has been balancing just ahead of a zone and/or market internals are particularly weak.
Adjusted zones for today below:
Monday Prep
Q3 Performance
The monthly trend continues to be one-timeframe higher, with September's range 2445.50-2517.75 and a VPOC of 2504.75 (launching point of break to new highs and low on 09/29). The sector performance for the quarter shows growth sectors leading and defensives lagging. If we were at a market top I'd expect to see some rotation out of growth into defensives. However, that doesn't mean we couldn't see a sharp break lower from here as anything is possible, but the market appears to be supported with bullish relative moves in growth sectors. The broader market Russell 2000 has been on a tear, rallying over 10% from its low in August. Nasdaq hasn't managed to get back up to its all time high of 6025.75 from Sep 1st, but it's pushing back towards 6000 currently.
Friday opened at 2506.75, made an attempt to break higher and failed at the 09.25 prior high and moved down to test the 04.75 HVN mentioned in Friday's prep. This was the launching point of the move higher and we did see some reaction at the fib levels also mentioned on Friday (RTH range: 2504.75-17.75)
Friday's profile left single prints between 09.50-10.25 which I'd like to see revisited as a potential strong area of support on first test.
Overnight so far the range is 2517.00-2523.50 versus settlement at 2516.00
Zones for today are below. If we see a rally and failure at the IR zone we could see some liquidation. If we break lower first then I would expect to see buyers step in on the first test of 15.50 if there's not too much momentum behind the move. I have the short term bull/bear zone at 04.25-05.50
Friday Prep
After opening at the prior day's mid point (2501.25), the first hour was slow and stuck between the IR and IS zones. The break through IR took some time with a lack of meaningful volume, though underlying stock momentum and market breadth supported the move. Buyers failed to break the 07.75-09.25 zone and left a poor high on the day, following the poor high left the day before. The lack of excess at the highs makes it unlikely we've seen a top yet.
Overnight so far the range is a very narrow 2505.50-08.25 on very light volume. If we see a move to new highs early on which is not accompanied by decent volume, momentum and breadth, then this could be a false breakout which could see sellers press back towards the 04.75 HVN and potentially the weekly VPOC at 2496.75. On the upside above 09.25 there is no resistance and the 2512.00 & 15.50 levels are Fib extended retracements of the recent swing which may see a reaction if volume is light on the rally.
Zones of interest for today are shown below:
Thursday Prep
The rally pre-market yesterday had moved ES up to open at 2503.50 versus 2495.50 settle, leaving the market long from overnight and susceptible to an inventory correction. TICK momentum was negative and the A/D trended lower from soon after the open, which was good enough reason to be cautious of using the broken resistance zones as support on the way down.
The move into initial support was the best opportunity of the day, which stayed in alignment with the overall bias and eventually led to new all time highs. A poor high was left on the profile, likely as the market had got overly long towards the close. Financials were the best performing sector on the day, as talked about in yesterday's prep.
Overnight so far, the range is a tight 2501.50-05.50, just 2 points either side of settlement. If the market can push through and hold above the 03.50-05.50 zone with momentum, volume and breadth then I would expect continuation of the trend through yesterday's highs. However, if it struggles to break this then we could see some short term liquidation to find buyers towards the other side of the current balance area as yesterday could've been a false breakout. Looking for buy responses at the support zones on a sell off but cautious if market internals are overly weak.
Zones for today below.
