November 21, 2023 Missal: All Time Highs?
This is vengeance
Image 1. What air brake? Freight train at 4550
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Minister’s Missal
Last week I mentioned “two key contextual areas represented by four hour fair value gaps (FVGs) targeted by buyers or sellers. Buyers want to fill the gap above with ideally a close over 4570…” For new traders, it is important to understand that these themes don’t necessarily play out within a day or two. It is one thing to guess the direction of a market; another one to guess the timing, let alone both. What we do understand however are key levels and the context that informs our best trading guesses according to probabilities we come to appreciate and use to our advantage.
Image 2. July balance area at the highs
In a very short time we are back at the summer highs. Had you asked me a month ago I would have given this rapid scenario a low probability of success. The best strategy in times like this is to avoid stepping in front of the train, or if you insist on shorting as your main strategy then wait for confirmation. We are not at the latter yet (and hopefully you are not stuck at the former).
In the near term let’s examine the events from yesterday and how that can inform today’s price action. Monday was an open drive session with barely a touch of the ON POC. IB broke and established above the prior week’s poor high. These were early bullish indicators in which it is a good idea to stick to the long trade…let someone else find the high for you. In this case we continued OTFU - the C period did not even make it to the IB mid, some consolidation at 4550 then saw a break through in H period. We concluded the day with a triple distribution, closing at our second weekly buyer target of the September high after forming a weak high at 4570.
Given the H period break and our weekly targets we have good references for the day ahead. I will be interested to gauge action around that 4550 break, or today’s pivot. Recall that today can see further volatility kicking off with Canadian CPI and then FOMC minutes later in the afternoon.
Image 3. Friday and Monday RTH, Tuesday ETH as of 5h42EST
Tuesday Plan and Levels
Pivot 4550, or Monday H period break. Given the aggressive action on Monday, I lean towards some slow down or consolidation, especially ahead of the FOMC minutes. And dovish indication in these could attempt a gap fill of the four hour FVG to 4596.
Buyer scenario. Early defense of pivot likely tests ONH. Volume above could see a test of the PDH at 4570, a break lends itself to a test of 4582. Further above is the 4593-4596 area leading to a gap fill. Leaving room for surprise, 4604-4609 July balance VAH is a further area of interest. Buyer LIS is likely 4544.
Seller scenario. The 4550 pivot is critical. Short look to keep pressure below if the ONH can be successfully defended. Trade below the C period single 4544 targets 4535 and a potential break of daily OTFU below 4525 - with 4513 further below.
Sustained selling would likely need to see VIX above 13.70. Conversely VIX below 13.28 can mean tailwind for longs.
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