Two-sided activity expected within the blue distribution.
Recap & Plan
Friday’s ON session came down and tested Smashlevel 3950 (ONL: 3943.50). Sellers failure to gain traction below 3950 fueled a rally during the Europe session and we got a full traverse of Wednesday’s inside day, leaving behind very poor structure.
Friday’s RTH session opened on a true gap up after a strong overnight session and buyers failed to break and hold above the ONH, prompting an inventory correction. The poor structure from the overnight session was retraced quickly and the gap was filled already during the initial balance (first hour of RTH). The AM session formed a b-shape profile with sellers reloading around ~3970 and buyers stepping in around ~3955. The b-shape was resolved to the downside in F-period and sellers again tried to attack Smashlevel 3950, but lacked follow through. Did you notice that we didn’t have a single 30 minute bar close below 3950?, just tails. Similar to the ON session, sellers not getting any follow through resulted in a closing rally that blasted through that prior reload area for sellers around ~3970 and partially filled the A-period excess. Failing to hold below 3950 was a warning sign for sellers and also, did you notice how VIX started dropping at the end of K-period? Another clue to be cautious with any short plays into the close.
We end up closing right back at the weekly VPOC, which acted as a magnet in the lack of downward continuation. Daily is back to a 3 day balance since prior day’s high was breached. Note the the 3 day balance high 3992.75 is weak due to the exactness of the 11/16 high. We do have two ON session highs around that area as well, meaning there should be some stops above that buyers are targeting. Weekly remains in one time framing up mode, but note that the 3 day balance low 3913.75 is previous week’s low, meaning weekly is back to balance if breached. That is what sellers are targeting. We remain within the “blue distribution” (volume profile from the last 10 RTH sessions), meaning as long as we trade within that area. we can expect responsive two-sided activity.
Essentially, buyers want to see a daily close above 4009 for an attempt at a directional move upward. We are yet to see a daily close above 4009, despite trading above it multiple times previous week. Conversely, sellers want to see a daily close below 3940 for an attempt at a directional move downward. We have a HVN at 3845 which will act as a magnet in the event of any selling success.
As always, check out the Weekly Outlook for a view of the bigger picture, where I've highlighted some significant levels of interest to observe for the coming week.
Disclaimer: Futures and options trading involve high risks with the potential for substantial losses. The information contained in this communication is for informational purposes only and does not constitute a trade recommendation and should not be construed as such. The reader bears responsibility for any investment decisions and should seek the advice of a qualified securities professional before making any investments. Owners/authors of this newsletter are not certified as registered financial professionals or investment advisers.
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Thank you. these have really help clean up my views and help to eliminate some directional bias.