Pre-market Update: Learning to Crawl
Monday October 23, 2023.
Image 1. Friday RTH and Monday premarket as of 8h40 EST
Monday Premarket Missal
Despite the fire sale into Friday’s close, recall in the image above that the day formed a balanced profile, with sellers rejecting higher prices at open, only to reject balance once again into close. Daily OTFD continues until a prior day high is broken. New buying is not yet evident on tape; in fact I was pointing out during the break above 4300 seemed more like short covering than new buying interest. Will we repeat something similar at the 4200 psych level?
For now (as of writing) it looks like we will be opening at or below two major resistances : YVWAP 4237.25 and 200D SMA 4258. Buyers will need to establish not only price but time above the latter to build energy for a test of weekly pivot 4285. Remember, time equals acceptance, and is the regulator in markets. Price is merely the advertisement.
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Image 2. Levels from late May balance
RTH Plan
We are in an aggressive daily OTFD until buyers are able to establish balance, with the focus to hold 4200. Pivot for the day 4248, this is where we saw a heavy bid on Friday holding further downside. As of writing we are trading 4235.
Note that this means sellers are in a position premarket to enter weekly OTFD, gaining control across all timeframes. Ultimately buyers will need to break daily OTFD first, recall that the weekly pivot 4285 is still above this possible event.
Buyer scenario. An ideal scenario for buyers may be a look below and fail around 4220/ONL. A failure of sellers to capitalize on ETH downside progress could see short covering as well as new buying above 4225. This could be helped with VIX falling below 22.08 and preferably below 21.60.
Net overnight inventory is currently short. This could see some counter-auction at open - sellers may be expected to step in around 4248 - the base of the M spike on Friday. Further above is 4258 POC/200D SMA confluence which can act as a magnet for trade. The next targets are 4270 Friday POC and area of late-day failure. Further above is 4285 LVN and weekly pivot. For higher levels consult the weekly note published yesterday.
Seller scenario. Initiative below the ONL and/or failure to close the overnight gap (as of writing) would target naked POC 4214 to major psych level 4200, a zone where buyers are likely to defend.
VIX above 23.3 however could see further downside pressure and possible overshoot of 4200 to 4191 NVPOC, with 4175 May POC a final target in case of liquidation.
As in the weekly note, AAPL needs to hold 170 to see the S&P hold her ground at 4200. The same holds true of TSLA at 204. Meanwhile our thesis on BTC strength is playing out thus far, setting up a test of 31k during RTH. Any strength is NQ will need to see 41700 reclaimed on volume.
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