Weekly Review and Outlook: Nov 20- Nov 24
Holiday week.
Image 1. B-24 Liberator shot down in WWII. One left flying (USAF)
Fresh off the plane to post a quick weekly review and outlook. Just not the plane above… that’s meant to be a reference to the buyers still going above 4500. I don’t mind keeping the note short either as this will be a very quiet holiday weekend in the US. I don’t expect much movement but a fifty point extension from range is not out of the question either.
Week in Review
The lower-than-expected CPI surprise saw the market decidedly break to the upside from a multi-day balance on a significant gap, leaving a double distribution on the week. That strong buying was later confirmed by a deep buying tail on Tuesday and establishing balance above 4500 for the rest of the week, on the back of solid performance from the megacaps. A major sign of confirmation for the winning streak from 4100s for the longs as value migrated up to meet price. In fact, short term (five day) value is comfortably at 4520, however medium-term value remains at 4379 (and 4396 for 20D VPOC).
Sellers want a return below 4400 - although 4450 is the first realistic target and ultimately where buyers are likely to step back in. Recall that a gap fill targets 4437 and a successful defense implies weak sellers. But even without a gap fill attempt to trap sellers, can this week bring us back to the previous highs to unfinished business above the 4560s?
Right now the winds are in the buyers’ favor, especially if 4500 remains supported. In the near-term buyers will be targeting 4550 and the four-hour fair value gap (FVG) at 4570, ultimately a fill to 4596 - thus an effective test of 4600. Longer term buyers clearly have an eye to an end-year ‘Santa rally’ in line with seasonality.
Image 2. Weekly structure. Note the gap and four-day upper balance.
Next Week’s Outlook
I am interested in the buying tail low at 4485 for a weekly pivot. One possibility is a dip into and below 4500 to gauge buying interest, a traverse of the upper distribution likely gates to 4550-65. I expect some selling to come in here, which could cap the upside to the week.
However if sellers were to see a meaningful close below pivot, this could very well trap buyers above and see some sort of liquidation especially if 4450 were broken on volume.
This week’s references:
4580 - 4596 gap fill
4554 NPOC to September high 4562
4537 poor high
4524 delta shift
4484 weekly pivot
4450
4437 gap fill
4415 LVN
4396 20D VPOC
a) Buyers defending 4500 early on will target the PWH and poor high 4537. A break on volume can bring targets 4550 to 4562. Further momentum and/or a close above can see an attempt at the gap fill, targeting 4580 to 4596-4604 at the higher end.
Buyers’ LIS is 4450.
b) Sellers initially defending from trade above 4525 will look for a solid close below the pivot 4485 which likely gates into the gap. The 4450 psych area may see buyers come in, however a strong push on volume below targets a gap frill to 4437.
Further momentum could turn the tide in favor of sellers near-term and see some fill on the profile to LVN 4415, with 4400 below. Note 4407 ends weekly OTFU.
c) Holiday week closed Thursday and half-day Friday. FOMC minutes Tuesday. Unemployment and consumer sentiment on Wednesday, finally PMI on Friday.
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