Cannonball and Cover!

Eye on the ball.

Image 1. Cannonball Adderley. A true Great

Day Review

Very quickly, a repeat of today’s plan thesis:

“Indecision around 4436 resulted in both a weak high and poor low - we would expect to go with strength on a break of either.”

Following an evenly split (delta) ETH session which retested pivot 4436 just ahead of open (Image 3), buyers stepped in at the open with barely a look below. This is a good example of a ‘look below and fail’ setup aside from the execution speed necessary, with only a retest of the ONH from above at the tail end of the A period.

The break sparked short covering as per our buyer thesis from the earlier plan, as we were effectively OTFU throughout the day. Some absorption of buyers finally took place around the prior balance POC 4493, before rocketing into 4500 and 4509 just ahead of the close. All buyer targets were reached today, including the updated 4507 posted to Twitter once we traded balance POC (Image 2).

Image 2. Weekly Outlook buyer thesis

This leaves behind nearly 35 points of poor structure below 4490, an area that is likely to get revisited (although not necessarily tomorrow! - more on that below). In fact, this will be a good reference level heading into tomorrow.

Recall we posited a possible swing low forming the week before, we are now 125+ points above that mention. Buyers are in control on the daily and weekly timeframes, managing to close over QVWAP heading into the month close. However they will likely be running into resistance within next 30-50 points.

Image 3. ETH, RTH profiles.

Image 4. 5-day; balance; and daily profiles

Tomorrow’s Missal

Following a true trend day, we are nearly out of buyer targets for the week. I would caution chasing at these levels, however going into month’s end there is still some juice left to squeeze potentially. The IB relative to 4500 will give potent clues for the remainder of the session.

Oil keeping above 81 may see further upside to the indices, as does VIX sub 14.5.

• Buyer scenario. Defense of 4490 in IB can set up a retest of buyside liquidity at 4517, where sellers are likely to step in, with 4530-33 and the 8/10 high of 4545 further above.

• Seller scenario. Sellers look to address poor structure below 4490 to 4458 and five-day value at 4445; opportunistic buyers may step in at 4470.

• Notes. ADP employment and preliminary GDP at 8h15EST and 8h30EST respectively.

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