March 5, ES Plan and Missal: B Side

When the groove runs out.

Image 1. Split ends. Scissor-tailed Flycatcher

One day I’ll share a list of my favorite jazz albums. For now I’ll make a passing reference to vinyl in analyzing the opening action of March. What promises to be an exciting month for traders. Does Monday’s ‘look above and fail’ of the PWH herald a possible gap down Tuesday?

Minister’s Missal

First a note on the day’s profile. The classic ‘b’ shape - indicative of seller absorption - broke in the afternoon into my first buyer target 5157. This was off by only a few ticks (5157.75 HOD and new ATH). As I noted, this was the ‘gate’ to higher prices. However heavy buyer absorption and buyer exhaustion at the highs led to very short-term long liquidating into close.

How short-term? Enough to clean out all the longs from the day’s trade to just above the opening level. And then below the RTH LOD at the settle. A total wash.

That doesn’t mean that market-on-close (MOC) was weak, on the contrary it was at 2B. This in itself doesn’t mean much, but has some import into how we open tomorrow. I’ll get to that in a bit.

Image 2. Friday RTH, Monday ETH and RTH

While the overnight action suggested weakness into the open, sellers were not able to take it further in IB as the day pivot 5140 became ‘sticky’, Buyers slowly ground upward even as delta remained neutral. This was one sign of relatively weak buyers. Nonetheless price broke upward on strong buying imitative in K period, taking out short stops into new ATHs.

This is where buying activity ceased however. The weak longs finally showed their hand with no follow-through, and patient sellers - attracted by the better offer - stepped on the bid with virtually no supply below. The caused a full traverse of value area, settling below the day’s range after close.

An unusually strong showing by sellers. Were they merely responding to a vacuum of demand or will they finally show initiative? The globex open suggests weakness into the ETH session, and I think the breakout 5123 level will be key heading into tomorrow.

A gap lower could see dip buyers step in to attempt a reclaim of value at 5144, where sellers could step in. In the case of a gap open to the downside, failure to fill the gap early on is indicative of buyer weakness, which can challenge the 5123 weekly pivot / breakout level and invite levels below. An early hourly close above 5140 could negate a selling effort however, and follow-through over 5150 likely sets up another test of the highs.

Image 3. Daily profiles in immediate context, ES

Price Action Analysis

Buyer initiative - which manage to clean out weak shorts - failed to see any follow through. After establishing a weak high on a failed push above 5157, stronger sellers stepped in. With the lack of committed demand below, late longs liquidated into close. Closing at VAL revealed the extent of weak buying, and this area must be monitored closely into the ETH for further clues of seller strength.

Image 4. Footprint analysis into the close

Tuesday Plan and Levels

Pivot 5123. European inflation premarket, services PMI at 10h00EST. Fed speakers in the afternoon.

a) Buyers defending 5123 or closing any gap open target an hourly close over 5140. Above 5150 targets the highs and 5164 where sellers may step in. The buyer LIS is 5113.

b) Sellers defending 5140 early on target an hourly close below pivot. This opens a test of 5113 to 5106 (Thursday’s selling tail base). Strong liquidation could aim for NPOC 5904.

c) VIX will be an important gauge tomorrow. Over 13.73 can support more aggressive selling, while buyers look to see prints below 13.10. AAPL and TSLA have turned decidedly weaker, the former needs to reclaim 177 and the latter 196 to lend support to the indices. Finally consider 18245 on NQ the intraday pivot.

Any updates will be shared premarket.

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