Weekly Review and Outlook Sept 4-8
Bulls can almost smell 4600
Retrace - Weekly Wrap Up
Image 1. Pit Bull
After shorts failed to keep a cap on 4470 early last week, buyers sensed an opportunity to reclaim lost ground from three weeks of selling. And they did - retracing more than half of the 250+ point move down by week’s close. All days but one closed above 4500 as sellers left the picture or wait to reload for another possible leg down.
Eyes this week will be on continuation above PWH 4547 (or 4554 weekly FVG), or a return under 4470. All else is noise in the meantime.
The week began in continuation of daily balance broken on Tuesday in aggressive price discovery above that prior week high of 4469 to the upside. The week close sees us in balance on all timeframes. Short term value migrated from 4402 to 4523 - nearly three percent higher! Note the strong buying (blue) delta above 4500. Two distributions are separated by poor structure from 4451 to 4490 left behind in the emotional covering. This is an area that short-term sellers will want to see revisited early on in the week, with time spent below 4490 putting a question mark on buyer strength. Know your timeframe - time is the regulator in markets, price the advertisement.
Image 2. Prior week profile, top; 20D profile, below
A note on seasonality. So far August stuck to the playbook (Image 3). Volume should continue picking up as we enter the fall season. Historically we have seen some balance before a spike into mid-September peaking around the first day of fall. Which coincidentally sees some fall, erm, retracement of the earlier move up.
Image 3. S&P Seasonality since 2002
Lastly, longer-term value (20D - Image 2 above) has also moved up from 4493 to 4527 (TPO; volume-based at 4518). At first glance the are between 4490 and 4540 could use more work before the next 75-100 point move - to give pause to early bulls or bears in the week. As with the past Monday break the usual rules apply: go with the break of balance. However it bears repeating that a failed break (look above or below and fail scenario) often sees a traverse of value. Context is king.
Early on buyers will want to capitalize on continued momentum and break absorption above for further price discovery. Cleanup into the fair value gap (FVG) below 4496 (allowing margin to 4490) can strengthen the market in the medium term however buyers want to defend this area as not to break structure. Sellers on the other hand look to defend PWH 4547 (with margin to weekly FVG 4554).
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Levels Next Week
Two important levels early next week are 4490 and 4540. There is a good likelihood of balance at least ahead of Wednesday PMI and Euro economic health; and Thursday unemployment and a list of FOMC speakers. The reference pivot is 4425, or August POC.
VIX under 14.5 could support more upside. In related markets, CL could be headed for a test of 92 while 83 holds. Strong oil could support the indices in the near-term. similarly, NVDA over 500, TSLA above 260 and AAPL over 190 would signal risk-on appetite. For NQ levels, see the next chapter.
4602 NVWAP
4591 gap fill
4571 buyside liquidity
4547 PWH (weekly FVG 4554)
4525 weekly pivot
4505 LVN
4490 sellside liquidity
4451 poor structure
4424 poor low
a) Buyers with a daily close over 4554 can then target 4571, 4591, 4605. Buyer LIS is 4470.
b) Daily close below 4501 could see a repair of structure to 4451, buyers may step in at 4470. Further below is the poor low at 4424. Seller LIS 4554.
Sister Nasdaq
In NQ, tech can continue to be supportive of higher prices (in ES as well) while above 15415. A couple of closes over 15605 could see 655, 720-40, where sellers are likely to step in. In case of momentum, levels 790 and 830 are further above. under 15415 target 235 spike halfback where longer-term buyers are expected to show; further below is the FVG at 126.
Profile Landscape
A zoomed out view of balance areas representing buyer and seller magnets. Note the poor structure from last week.
Image 3. Balance profiles from July-August
