Rug Beating
Shake down.
Image 1. Show me on the rug where the weak buyers are
Day Review
A very interesting overnight session following the main event on stage - NVDA earnings. Following a blowout report and call, buyers were champing at the bit into the European open. However this is where we saw first signs of trouble with an indecision candle posted in the opening 30m of trade. Where longs extended too far too fast? Maybe so - even more so as we ran into our critical 4483-4 level and HVN/POC zone from our prior plan (Image 2).
Image 2. Upper target and probable area of selling from prior Missal
Stepping back for a bit, the ETH profile was very heavy with buying delta to the upside that found no traction (Image 3). In other words, delta divergence as buyers were potentially trapped. The heaviness resulted in an RTH open just below globex, not an encouraging sign for buyers out of the gate despite the NVDA blowout ( in spite of?).
Sellers initiated to the downside at open until responsive buyers were found at the prior day’s high. This was a mechanical bid up however as there was little volume for follow through. Note the diminishing buying delta as we approached VWAP. Sellers immediately stepped in, taking advantage of attractive prices regardless of the trade through open. This reveals considerable seller strength. They began OTFD on heavy hits on the bid, into all of our daily expected levels by E period. I posted a note in Twitter about potential levels sub-4400, which saw sellers achieve trade below the 4390 LIS from the prior week into close.
Quite the liquidation of weak hands with poor structure left behind, erasing over 90 points or the majority of the swing move up. We are now in a seven-day balance on the break of OTFU. Regardless of the selling, short-term value has moved up to 4408. Going forward buyers need to hold 4378 to rescue the bid: today’s low. The main level to watch going into tomorrow is 4401, the level of late-day break.
Image 3. ETH, RTH profiles. Note buyer absorption in ETH.
Landscape and Key Levels
Image 4. 5-day; balance; and daily profiles
Tomorrow’s Missal
A full roundtrip from last week’s trade under 4400, to nearly 4500, and back again. The important level now is 4401. Despite the liquidation this can strengthen a market for another attempt long - as long as bids on volume are found. Sellers on the other hand need to see follow through for the move to gain momentum.
Watch for VIX to hold 17.1 for seller support. Buyers want to see this come back under 16.2 for potential upside.
Buyer scenario. Buyers defending 4370 or the ONLs will look to reclaim 4407 and 4424, targeting poor structure above. Consider levels 4436 and 4454.
Seller scenario. Sellers look to capitalize on momentum, defending singles to 4401 would then focus on the main target at PWL 4350. Sellers may encounter a bid at 4367. Under PWL targets 4337, 4321.
Notes. Consumer sentiment 10EST, with Powell speaking shortly after.
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Don’t maintain bias in the face of contradicting information! Capital preservation is key.
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