Tuesday Prep
The market correction is now coming up to 3 months old, and prices remain about 8% off the all time high. On the above daily chart I've drawn a volume profile around the range extremes up to date which shows a fairly balanced distribution with prices currently rotating around the VPOC of that range at 2657.50. Earnings season so far has delivered mainly stronger than expected EPS and revenues, but we're not seeing much follow through in price. AAPL is the big one after hours today - given how weak forward guidance has been by Taiwan Semiconductors, this is going to be an interesting one to hear from Apple.
The overnight range is currently 2641.25-53.75, overlapping lower to yesterday. The double distribution yesterday is separated by the single prints highlighted and there was a poor low left. The top of the low distribution is at 65.25 and I would remain short term bearish unless this is broken and held above.
Wednesday Prep
The market had spiked higher pre-market following CPI data that was in line with estimates. There was an attempt to push through the overnight highs after the open but as you can see in the 1 min chart above, the TICK was not showing strong bullish readings with the move and we eventually saw a precipitous move lower. The retest of the overnight low at 2788.00 (also within the bull/bear zone I was using) was probably the best R:R opportunity for a short following the impulsive move lower. The weak structure from last Friday was revisited and 'repaired'. However, there's still a large open gap which is why I was reluctant to put a green zone ahead of it.
I'm travelling today so won't be able to trade but have updated the zones below. The 86-89.50 area still looks key for sellers to defend and a move and hold above there could put the squeeze on the shorts once again. Retail sales and PPI are due at 07:30 ET.
Tuesday Prep
Yesterday the market gapped above the prior day's high, took out the Feb 27th RTH high at 2795.75, but failed to get the volume and momentum to continue, leading to pullback. A balanced profile was left overlapping higher to Friday's range.
The 2788.50-89.50 area has built noticeable volume and I'm using that as a short term bull/bear zone because acceptance below that could see sellers drive lower to take out yesterday's poor low and weak structure left from Friday's move. Above there puts buyers in a stronger position to push higher, though there are some potentially strong areas of resistance above.
Overnight so far, the range is 2786.25-2804.25, following CPI data that was in line with expectations. The key zones I'm watching today are shown below - overnight support at 94-96 and short term bull/bear at 86-89.50 being the nearest to the market currently. The current trend remains bullish but be aware the recent moves have left weak structure below to be revisited should we see a break.
Monday Prep
Friday's strong jobs report combined with subdued wage growth sparked a strong, straight up rally all day leaving a lot of weak structure in its wake. Any positioning ahead of the release for a sell-off was aggressively squeezed out and forced to cover.
This rally has continued overnight breaking above the last swing high on Feb 27th and is currently moving up towards the major breakdown area (see circle below) from Feb 2nd, which is nested below January's VPOC and the Feb high. This is a key area where I would expect sellers to step in on first test. A break and hold above the 2843.25 Feb high changes the medium term outlook to bullish from neutral. With more supply in the 10 and 30yr auctions plus CPI, Retail Sales and PPI in the first half of this week, there are some potential headwinds..
The overnight range is currently 2788.00-2805.25 vs 2788.75 settlement (ESM8). Acceptance back inside Friday's range could see some late longs liquidate and push down into the single print areas pointed out on the above chart. Consolidation of the move is more likely in the absence of any market moving news.
Monday Prep
Since the all time high at 2878.50 (made in overnight session) to the Feb 6th low at 2529.00, we have a wide trading range established whose mid point currently is at 2703.75, about 1% away from the market currently. March has so far traded inside the value area of February and Friday's trade showed a rejection of lower prices and a 49 point rally from the 2647.00 low.
There's a shelf of volume on the composite profile between 2684-88 (see below chart, rhs). Whichever side can dominate above or below that area I'd suggest is in the driving seat today. If in doubt stay out, and that's what I'm doing for now as I'm not a fan of trading in the middle of ranges.
Tuesday Prep
Another bullish session with RTH gapping above the recent range and failing to fill that gap on the attempt in the morning. Once reversed and trading above the Feb 5th high at 2763.00, bulls are fully in control and shorting becomes a dangerous option.
We are leaving weak structure behind but the immediate pressure remains higher, as the market gravitates towards the high volume 2800-2805 area (with 2800 a high option open interest level too).
FOMC Chair Powell testifies today, so expect volatility as the order book evaporates and the dollar and bonds likely drive moves.
Zones for today are below and will be cautious on shorts unless evidence shows up things have changed in the short term. The market is stretched short term so a good idea to exercise patience, especially ahead of the testimony later.
I'm travelling tonight and tomorrow so will update again on Thursday morning.
Monday Prep
Did I miss much??!!
Apologies for the long break in service but I intend to get back to providing my market analysis, review and zones of interest for the ES with immediate effect. Thank you to a very kind reader who emailed recently and encouraged me to get writing again.
A lot has been happening since I last wrote in early December. The most recent events in February have eclipsed what was a parabolic rise in January. Structurally, there have been some key drivers behind these moves. Shorty volatility strategies being the main one and the break down in this along with concerns of wage inflation beginning to show and a pick up in yields are all contributing factors. The era of super low volatility is likely to be over, which is fantastic news for us traders. That doesn't mean we couldn't still make new all time highs, but if that did happen expect more volatile swings than we saw last year.
An overview of the daily chart below shows the monthly volume profiles along with a 20 and 200 day moving average. There was close to a 200 point bounce off the 200 day moving average before a re-test and the rally we've seen since.
A look at Friday's action on the market profile in closer detail below:
The key levels above Friday's close are the low from Friday Feb 2nd at 2755.25 and the high on Monday Feb 5th at 2763.00. If this rally cannot push through that 2755.25 level and we see sellers defending that breakdown point, then any short term 'weak' longs are likely to bail out and accentuate a liquidation break lower.
Continuation higher looks likely from the price action, especially if the Feb 5th high is breached which would be another failure point for shorts and covering needed.
Below is the hourly chart with Feb's volume profile. I'd be very cautious shorting this until we see a break down and failed retest of recent highs.
A closer look at the RTH profiles from 2nd & 5th Feb show where the market is attempting to back and fill if we see a continuation higher today:
I'll update zones this week but in the meantime, initial resistance potential is at 2755.25, then 63.00 and initial support at 2727.75-2729.75 (break out area from Friday).
The new FOMC Chairman, Jerome Powell, is speaking on monetary policy at 10am ET tomorrow and Thursday so expect a pick up in volatility again this week.
Friday Prep
I'm still using the Dec contract until Monday even though volume has started to be higher overnight into March.
Yesterday opened at 27.75 and immediately tested the overnight low and we got a one tick failure below followed by a reversal. The immediate target then becomes the overnight high at 37.00. Value pushed higher on the day but market internals were not particularly supportive of the move.
Overnight we've had the employment report and the range is currently 37.75-49.50, extending up into the 48.75-50.75 resistance zone (where the poor high is shown in profile chart at the top). If upside momentum fades, we may just balance between initial support and resistance. A break and hold above IR will continue to trap shorts and see a squeeze. If initial support fails and prices accept back in yesterday's value area, we could still see buyers step below.
Thursday Prep
Going into yesterday's open I was using 25.50-27.50 as the bull/bear zone. It did act as support during the morning with weakening internals. The fast break under 25.50 was a head fake and then saw trapped shorts squeezed with a move up to initial resistance (the morning high tagged the prior day overnight low at 33.75). After the attempted flush lower and the market moved back into the bull/bear zone, you can see below a new TICK high as underlying momentum shifted temporarily.
The Russell was weak and Nasdaq relatively strong, so there was a lack of confluence with all three removing conviction for a directional move in ES.
A balanced profile was left and both sides of the first hour range (initial balance) were broken and the market settled around it's POC/VPOC /mid and VWAP. The 25.50 CHVN held as support and remains an important short term pivot. The prior month mid at 27.50 also remains important in my view for the longer term bull trend to continue.
Overnight so far we've seen an initial push higher to 2637.00 followed by a steady decline back to 27.50 currently.
The zones I'm using today are below. We remain in a two sided market state with prices at a critical juncture for the intermediate trend, I believe.
Wednesday Prep
Apologies for the long break from the daily note; at least we are beginning to see bigger daily ranges and some signs that sellers efforts are not fruitless in the past few sessions.
The pullback from the 2665.25 all time high has seen a move back to 2620.00 overnight, with most volume trading around the CHVN and last month's VPOC at 2625.50. Last month's mid was at 2627.50, and for the long term trend to stand a chance of continuing I'd want to see the market rally back above there and retest it for support. I'm using a bull/bear zone at 2625.50-27.50 for now. If we break and hold below the overnight low at 2620.00 we could see further liquidation down to retest last Friday's low. Above the bull/bear, I'd expect to see responsive sellers step in at the red zones. Any particularly positively spun news headlines could trap shorts and see a sharp squeeze, however.
The range so far overnight is 2620.00-31.50 versus settlement at 28.25
Today's zones are shown below. The profiles which are shown split are the RTH times and the closed ones the overnight market.