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Good morning everyone. Stormy seas ahead!!!
Yesterday we saw more downside selling pressure and the /NQ's (large cap tech) were definitely the weakest of the bunch early on, however, a late day short squeeze destroyed the bears once again...or at least some of them!!
There seems to be this magical, never ending bid in the markets and buyers just come out of the woodwork to support and prop the market back up. That being said, the rally was late in the day and the greatest amount of time and volume were both lower, suggesting there was a chance of retracement back down towards value today, but we have a large gap to to the upside this morning and the shorts are now scrambling.... again......especially in the /NQ's! (Remember...always ask yourself....who is happy? who is sad? who is making money and who is losing money?!?!)
What I am seeing right now is downright crazy with no rhyme or reason to these big moves, so as the headline above says....Stormy seas ahead!! Meaning please be VERY fluid with this market.....longs and shorts are getting crushed right now if they don't act and switch sides and only the most nimble will survive this price action!!!! I have been doing this a long time and this is market is very difficult to navigate but obviously I am going to try my best to help!
As i mentioned in yesterdays MC,
"...the market has been going up on this kind of euphoric, nothing can ever go wrong state, and it is making me quite nervous. Structurally from our last report we are still in a very large balance area (check out profile picture below) but I would start looking for lower targets if we stay below prior days range!"
And that is exactly what happened. From yesterday as well...."/ES downside target was 4765-60 (*if lost, then 4750 then 4735 will be key!)"
That 4750 extended downside target was hit as yesterdays low was 4746.25
Now please don't get me wrong....I did not know this was going to happen with 100% certainty and I was actually looking for a short term move higher in the markets early on yesterday to balance out the overnight inventory but that never happened...especially in the /NQ's!!! They opened up, never took out the 1 (one) minute high, took out the overnight lows and sellers came in very aggressively!!! However, we all know how the markets closed....WELL off of their intraday lows!
Also, please note, I am not all out short and I still have some longs that are working (DG), but I am much more in the neutral camp as far as overall portfolio positioning and I am looking to get more to the short side (CMG, NFLX, MSFT are on my radar) and sell remaining longs once I see more confirmation. The bearish slant for the moment is showing me that the sellers are still trying and evidence of this analysis comes in no less than three important points and facts to consider......however with this gap higher this morning we could flip right back to the buy side. In the meantime.....
1.) Value has built lower and we are "one time framing" down meaning we are making lower highs for 3 days in a row so far (see the yellow shaded areas in the profile pic below)
2.) We have put in 2 new VPOC's ABOVE us in just as many days....4816.50 and 4798.
3.) We also now have a true gap above us in the /ES although with today's move higher pre market, that gap will be filled at the open. (Meaning we are going to be back inside prior days range from Tuesday)
Futures are mixed with the DOW futures lower however the /NQ's are sharply higher this morning with overnight inventory balanced and looks to be on a true gap. (Reminder: A true gap is one where the market opens either above or below a prior days trading range and that is important because inventory that is "out of balance" usually needs to correct and "re-balance"!)
Trade set up for this morning is complete opposite of yesterday.....look for the overnight high to be taken out and if it goes back below the overnight high (currently 4797.50), then there could be a short trade targeting prior days high 4775.75. Stop would be the high and then trail down accordingly.
If futures do not take out the overnight high then the short would be below the one minute low and the stop above the one minute high...then obviously trail stop down if prices move in your direction. Just like yesterday the key to today will be if the markets can go back to prior days range and if not, that will be a good sign for the bulls.
/ES upside target is: 4795-4800
downside target is: 4740-35
/NQ upside target is: 16,980-17,000
downside target is: 16,760--750
/RTY upside target is: 1947-49
downside target is: 1907-04
Economic Data Today:
Raphael Bostic (Atlanta FED Pres) Speaking at 7:30 AM EST
Housing Starts and Building Permits @ 8:30 AM EST *Red Star Event
Jobless Claims @ 8:30 AM EST *Red Star Event
Philly Fed Manufacturing Index @ 8:30 AM EST
Natural Gas Inventories @ 10:30 AM EST
Crude Inventories @ 11:00 AM EST
Raphael Bostic (Atlanta FED Pres) Speaking again at 12:05 PM EST
More Color.......
/ES - Price is consolidating above Demand from yesterday at $4750-60
- Key Demand zones below that is between $$4700-4720
- Key Supply zones $4780-90 and $4800-4840 with support at $4763.
- If buyers fail to hold above support I will look to play a break and retest short
targeting previous demand below, if sellers get trapped at $4720 ( failing to break
and hold below then I will look to play long targeting $4750 first then $4760
SPY - Demand flipped to Supply at $472-473 with previous Demand below at $467-66
- For me to play long I would need to see a break and retest hold above $475
- Ideally I would like to see buyers trapped at the open at $474 with price failing to
hold above playing a break and retest short at $473 targeting $471.80 then $470
- Strong buying at the open (sellers trapped above $474 playing long target $475
SPX - Key Demand Zone at $4700-4720 with Supply HOD at $4805- $4790.
- Gap Down Yesterday with resistance at $4740 yesterday. If price can reclaim and
hold back above. I will look to play long targeting Supply.
- Buyers at the open failing to break above and hold $4750 with a pull below I will
look to play short first targeting daily Demand then a new LOD
/NQ - Supply flipped to Demand at $16650-$16700 with old Supply at $17050-100
QQQ - Consolidating inside Supply with strong buying overnight into the AM
- Key Supply with HOD at $411-412 and Demand at $401-403
- Ideally want to see a new HOD break with no follow through higher and pullback
below $410 to play a break and retest short targeting $408
- If Bulls can defend $410 off a retracement then I will look to play long new HOD
BA - Key Supply zone art $210-211 looking for a retracement at the open to fail and
hold above $211 looking to play short targeting 209 first then $207
Have a great trading day!
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