Slip n' Rip
Writing was on the wall.
Day Review
While Monday’s session seemed like a relief for buyers at the close, market generated information (MGI) was telling a different story.
Early strength in the Asian session was met with resistance just above our 4516 level (August POC) which resulted in selling. This accelerated with the European open, seeing heavy selling through the PDC. By the time US retail data was released, sellers managed to traverse the entire prior day range. This was a very bearish move.
Image 1. Prior day RTH and ETH profiles
The RTH session opened just below the prior day value. Buyers made an early attempt to reclaim prior day VA but met resistance just under our day pivot of 4493 - another bearish signal. The initial balance (IB) broke the PDL, stopping only two ticks below the prior week low. Buyers stepped in here - with only 7k negative delta they were able to rotate back through weak sellers and into IB half. This was an important area for them to retake but a lack of further buying momentum at VWAP resulted in lower highs into J period.
A final attempt at a break to the upside in K period saw further heavy absorption as passive sellers took advantage of the higher prices into end day. The L period saw heavy initiation through the day’s low, resulting in longs liquidating into 4450 and two points above our last target 4445. Selling momentum waned as shorts began to exit their positions into the close. Following nine days of balance but with a new low, the weekly continues to OTFD until buyers close at 4545. Sellers remain in control until MGI indicates otherwise.
Into tomorrow I will be interested in the 4558 level or the high of the M period spike (and near last week’s low).
Landscape and Key Levels
Image 2. Overview, daily profiles
Tomorrow’s Missal
Sellers look to continue downside price discovery into buyside liquidity below, which has a high probability of a visit before end of week IF selling volume comes in at the lows. Keep in mind unemployment data will be released Thursday; we could be carving out a swing low here beyond today’s session. To the upside, progress above 4476 can potentially trap shorts.
Buyer scenario. Excess below 4451 could potentially inspire buyers to retake and defend 4460 in RTH. An hourly close above 4476 can target 4491 Tuesday high, Monday high 4507, 4516-25.
Seller scenario. Holding 4470 in IB and a break of 4447 would likely see 4439. Further buyside liquidity may be found at 4424, 4411.25. A low around one of these levels may be a more likely outcome this week. As a reminder, 4393 (4390) is the anticipated weekly downside max.
Notes. Watch VIX to maintain above 16.25 for selling activity. Liquidation may occur above 16.9. Buyers may find a proxy for support in AAPL maintaining above 177.
Finally, some callouts for area of prior balance. If we consider June through July a larger balance zone (clear on the weekly) before the breakout, note the symmetrical distribution below. We have rejected the upper distribution with today’s close, entering the area of buying delta that was partially a factor of institutionals caught offsides in the run up through contract gap/4300. This is a territory entering expected buyer defense, where excess is more likely to be seen.
Share a coffee with the Rev on Ko-fi!
Image 3. June / July balance profile
Don’t maintain bias in the face of contradicting information! Capital preservation is key.
This is not investment advice and I am not a qualified licensed investment advisor. All information found here, including any opinions, commentaries, and suggestions, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. While the information provided is believed to be accurate, it may include errors or inaccuracies. I will not and cannot be held liable for any actions you take as a result of anything you read here. As always, conduct your own due diligence, or consult a licensed financial advisor or broker before making any and all investment decisions. Any investments, trades, speculations, or decisions made on the basis of any information found on this site, expressed or implied herein, are committed at your own risk, financial or otherwise.