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Good Tuesday morning,
Talk about everyone heading in the same direction, yesterday was it! Futures had an enormous gap higher Monday morning after trade talk news over the weekend, and the markets were able to hold those massive gains. That, my friends, is a bullish sign.
That being said, there was an excellent shorting opportunity first thing yesterday morning once the opening bell rang. Why? Well, as we discussed, with overnight inventory 100% net long, on top of a true gap higher, there was a very good probability for a short trade lower to balance out the inventory. Just remember: whenever there is a gap, either higher or lower, it is a reordering of thinking and the trade becomes lopsided, which in most cases will correct a portion of that imbalance. Now of course, very rarely, will a market gap up (or down) significantly and just keep going - that's why we look for that initial fade.
In yesterday's early trade, futures were not able to break above and take out the overnight high at 5865.75, so the first trade scenario was not in play. The second scenario, however, was, and the first one minute low in the /ES was 5839.25. The short trade was 5839 (or close to it) and the initial stop was set above the first one minute high at 5852.75. Now as always, if/when futures move in our anticipated direction, you should move your stop to breakeven as soon as possible, then trail the stop down. By the way - just because we set our stops at a certain price point does not mean they have to stay there. You always want to control and manage risk!
Futures dropped to 5819 before any kind of buying came back in the markets, so there was a very good opportunity to place that trade! I am NOT saying you will get every one of those 20 points, but hey, even if you got half that is still a great trade. Now if you were using the SPY for example, the short was below $580.39 and there was a $2.00 drop to $578.35, so again the set up was there. I wanted to spend a few more minutes on this particular subject because it will happen again and again and again! You need to know this strategy so you can use it in the future. It will provide you with many opportunities in the years to come!
Now back to today's business at hand. Futures are mixed; however, we remain inside of the prior day's range and above 1/2 back at 5841, so that is a very good sign for the buyers. We just had a pop on the CPI report, and if price can stay above 5841 and also above the POC at 5854.50, then continue to favor long trades. If prior day's high, overnight high and VAL (Value Area High) get taken out between 5871-5876, then look for upper targets as listed below.
If sellers come in and take price below 5854.50, and then below 5841, look for lower targets at 5830-5820, then yesterday's low at 5805.75. I can say the most important thing for today: if price can stay above the prior low, last week's range and Friday's high, then the edge will remain with the buyers. We are up over 20% from the April 7th lows and we are now only 5% away from prior all time highs again! The strong current is with the bulls!
Futures are currently trading at 5870 as of this writing.
VPOC Update: Yes, another new VPOC was added yesterday at 5678. 5726.50 was not traded so we still have 5 above and now 19 below. The next closest VPOC in play is at 5905.50.
TARGETS AND KEY LEVELS TO WATCH:
/ES upside target is: 5890 - 5920 then 5950-5960
Key Levels: 5854.50 POC then 5841 1/2 Back
downside target is: 5830 - 5820 then 5805.75
/NQ upside target is: 21,080 - 21,120 then 21,180 - 21,200
Key Level: 20,913 POC
downside target is : 20,850 - 20,800
/RTY upside target is: 2140 - 2150
downside target is: 2090 - 2080
Economic Data: Very Light Day
4-Week Bill Settlement
8-Week Bill Settlement
4-Month Bill Settlement
NFIB Small Business Optimism Index @ 6:00 AM ET
CPI @ 8:30 AM ET
4-Week Bill Announcement @ 11:00 AM ET
8-Week Bill Announcement @ 11:00 AM ET
4-Month Bill Announcement @ 11:00 AM ET
6-Week Bill Auction @ 11:30 AM ET
52-Week Bill Auction @11:30 AM ET
More Color By : Rich Rickus
/ES - Key Demand $5720 with Supply at $5900
Bullish : Sellers trapped above $5720 looking to play a break and retest above $5730 long targeting $5780 then $5800
Bearish Buyers trapped below $5700 looking to play short after a break and retest below $5595 targeting $5560 then a break down into $5550s
SPY Key demand at then at $560-561 with Supply above at $570
Bullish Sellers trapped above $561 looking to play a break and retest from $562 long targeting $564 then a breakout mid high $565s
Bearish Buyers trapped below $560 after a break and retest below $559 targeting $557’s then a breakdown into $556’s
/NQ Key demand at $20680 with Supply above at $21000
Bullish Sellers trapped above $20650 looking to play a break and retest above $20700 long targeting $20900 then a breakout back into low $20100’s
Bearish Buyers trapped below $20600 looking to play short from below $20550 targeting $20400 then $20350
QQQ Key Demand at $492-493 then at $484 with Supply at 508-510
Bullish Sellers trapped above $493 looking to play a break and retest from $494 targeting $495 then a breakout into low mid $497’s
Bearish Buyers trapped below $492 looking to play a break and retest short from $491 targeting $489 then $487’s
Have a great day!
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