Weekly Review and Outlook: Sept 25-29
It's up to the sellers to lose.
Weekly Wrap Up
Image 1. Traders and ‘Higher for Longer’ beneath the waves
Aside from Monday’s tight range ahead of FOMC, sellers quickly took charge as buyers were unable to trade into the prior week’s value. Weakness was already apparent ahead of FOMC with a close below the PWL While the Fed held the rate steady, strong language and a commitment to higher for longer pulled the rug from under the buyers, leading to a steep sell off resulting in a break of September low the day after FOMC. The Fed is not the only driving the hawkish bus, either, with global central banks taking a similar stance.
We continued OTFD with lower closes into Friday and a low just seven points from August lows of 4350. This will now be a critical level for next week and would represent a break of structure into monthly OTFD, exposing further weak support and a rollover gap below. With the daily OTFD, and potentially weekly and monthly soon, can sellers follow through and initiate below the August low? This could see a gap close and potentially find acceptance in June’s lower distribution. Meanwhile buyers have their own gap to fill above at 4446, with last week’s value higher at 4499.
Thus we are at a crossroads where sellers need to show strength early on in the week. Perhaps a best case scenario to put some fear in the bulls would be VIX with a couple of closes above 20 - another important psych level. Finally, take note of US consumer confidence and home sale on Tuesday, and Thursday with unemployment, GDP, as well as further remarks by Powell. Could this be the start of a local bottom of a 6 or 7% selloff thus far?
Finally core PCE and UoM consumer sentiment will be released Friday to wrap up the week.
Image 2. Prior week profile
Next Week’s Outlook
The weekly profile left a double distribution with a significant gap. Weekly value is significantly higher, which suggests value and price will look to converge. On the one hand, sellers want to see acceptance or time spent within and below the lower distribution to allow value to catch up to price. A break of the lower distribution to the upside can see a quick gap fill and a rejection of lower prices.
Buyers want to see VIX return under 15.1. Buyers could be supported with AAPL above 177 while sellers want to see a close under 173.50. Longs will benefit from TSLA with a return over 252. NVDA at 400 could see some psych level support.
4476 poor structure / singles
4446 gap fill
4419 lower distribution high
4390 intraday buyside liquidity
4350 weekly pivot
4327 rollover gap
4302.50 contract close
4290 balance PoC
4363 sellside liquidity
a) Buyers first goal is a close above 4390, rejecting downside price discovery. This may set up trade above 4000 once again and a potential full traverse of the lower distribution to 4419. A break on momentum could see a gap fill to 4446, where longer term sellers may step in. Further above is poor structure to 4476.
b) Daily close below 4350 targets a break of sellside liquidity at 4327 and a contract gap fill to 4302.50. This would in all be a major victory for sellers who would then look to find acceptance within June’s lower distribution and sellside liquidity at 4263 - support may be encountered at 4290. Finally, note psych number 4250 and FVG to 4239.75.
Image 3. Level Landscape
Thank you!!