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Daytrading Index Futures and ETFs using market generated information
The bears had their chance to give the longs a beating yesterday but failed miserably. The gap down open was immediately met by an aggressive responsive buyer and there was no sign of determined sellers at all. In the course of yesterday’s RTH session ES returned to the key 86.75 level, where selling was to be expected and did in fact take place but without any meaningful follow-through. Instead, the market traded higher overnight and is trading almost seven points above yesterday’s RTH close as I am writing this. We have the retail sales number as a potential market mover today which is a caveat but based on the current structure I think that the bulls have the ball right now and in case of a gap up scenario a responsive pullback towards 86.75 presents a chance to go long for 97-98, 1701, and the poor high at 1705. Below the MCVPOC at 86.75 yesterday’s 82.75 acceptance low is an important level. Should this break, the bullish scenario should be questioned.
The ES is looking very bullish before today’s FOMC rate decision. Yesterday the former MCVPOC at 77.50 was tested and rejected strongly before it shifted to 1683.50. This level is also yesterday’s VPOC so I expect it to be pivotal today and expect the area 81.75-83.50 to serve as support for potential tests of 1695 and higher. A break below 77.50 has the potential to test 72.25.
|Big Trading Idea / Context|
|With two uptrend days in a row, last week the market clearly showed that it rejects prices below 1647.75. After the holiday weekend we are opening way above YCL and the question for the early trade will be if we can hold or expand the gains or if the seller will reoccur at these levels trying to push the mark back towards 1656.00 MCHVN which is a key level for me today.|
|Hypotheses for the Day|
|H1 (Responsive)||Responsive selling towards YCL, potential support 59.75, 56.00. Should the market convincingly hold one of these support levels (e.g. indicating a strong low), I will be looking for further exploration higher via ONH and 1668.00 towards the ultimate target of 1677.25. On failure to hold 56.00 a retest of YHI/YCL around 1650 is very possible.|
|H2 (Initiative)||Initiative buying takes out 1664.25. Targets above are 1668.00 and 1677.25|
|H3 (Rotational)||Rotational action while the market digests the overnight gains. Tests of 1659.75, 1656.00 below, and 64.00 will reveal more about the participants’ motivation|