March 7, ES Plan and Missal: Short-Term Markets
Noncommittals.
Image 1. My plan for Thursday.
A difficult read on the close for many, including myself. While experiencing heavier than usual volume, much of the day was seemingly dominated by short-term traders. I share an analysis of short-term signs to look for further below.
In my view, neither side ‘won’. While buyers were able to reject seller attempts below 5100, they were not able to make progress above the gap despite filling it. On balance, the rejection of further downside is positive for bulls - but this is overshadowed by the second day of Powell testimony on Thursday and surely NFP on Friday.
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Minister’s Missal
The overnight session was net long coming into the session, meaning a 70% chance of inventory correction at the open. This is indeed what we saw after a look above and fail of the ONH. I illustrate with price action analysis in the next section below.
Support came in at the psych 5100 level - this was an important reference, albeit an obvious one, for the remainder of the session. Buyers managed to fill the gap above but found no traction within Monday’s range. This led to a sell off into 5100 again, which sellers were not able to break. The afternoon was spent in two-way trade between this and 5118.
Image 2. Monday RTH to Wednesday RTH profiles
The balance day was not unexpected given the lack of trade in the gap and lack of conviction by either side. The day left a double volume distribution around 5122 with buying and selling delta evenly split on either side. As the prior level of breakout (5123) this will be my reference into the ETH session, although I will consider 5132 or the five-day balance VAH as tomorrow’s pivot.
The day closed with a weak low and high - unresolved business at either end. Not only this but the close was near delta-neutral, with settle at the day’s POC. Truly a non-committal close. We are in daily and weekly balance. As of writing I lean slightly short heading into tomorrow.
Medium-term I expect a larger move to take place on either side of 5144 or 5044 - likely producing the next 60-80 points..
Image 3. Five day (short-term) profile, ES
Price Action Analysis
Below is another textbook ‘look above and fail’ scenario at the open. Buyers encounter passive sellers (note the blue delta with no upside progress), and sellers quickly attack the bid. A final buyer attempt to reclaim the opening price is rejected and exhaustion leads to sellers stepping back onto a lack of further buying interest. This causes price to move rapidly down into my 5100 level of support.
Image 4. Footprint analysis, look above and fail
Finally, a quick illustration on interpreting buyer strength through the profile. The key is not to do this mechanically, but it is one piece of the puzzle if you are building a thesis.
For example, note the exacting references below, like 5100 key psych number, period halfbacks, as well as the close proximity of the lows in each period (dip buyers). References like these are used by extremely short-term (intraday) traders. Big money doesn’t care about a period low marked close to another, they aren’t ‘dip buyers’ like you and me. So the chances of this action leading to new highs are markedly diminished. It doesn’t mean we can’t see new ATHs on this action, but adjust your expectations and risk accordingly.
Image 5. Clues in the profile, ES 30m
Thursday Plan and Levels
Pivot 5122. Unemployment data at at 8h30EST, followed by Powell Senate testimony at 10h00EST. Levels are largely unchanged.
a) Buyers defending PDL 5097 and spending time over pivot aim to break of PDH 5134, which can lead to a retest of 5140-44 where sellers may step in. A break of ATH can target 5164, 5171 to 5178 on momentum.
b) Sellers putting pressure below pivot need to break 4097 on volume. This can potentially see prior support 5083. A break here targets daily low 5064, with longer-term support at 5044. On the way, the 20DMA could see a bid at 5054.
c) On the VIX, sellers want to see prints above 15.01, while buyers seek a return below 13.90. Interesting, AAPL has remained weak, but likely needs to reclaim 172 to support the indices. TSLA over 181.70 and BTC over 68.5k can also see risk appetite return. On NQ 18130 can be used as a pivot.
Any updates will be shared premarket.
Image 6. ES 4H levels
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