hi friends,
This has been quite a week so far as well as a crazy session filled with traps and volatility. Not too bad of a read on my end for today as I provided real-time on Twitter & Discord what I am thinking.
This was the plan I had sent 8 minutes before the market opened where 4600 area was to be faded and the high of day was 4604 with no close near 4606.
We saw prices come down but things got bit interesting in the structure & the tape, which may have shown signs of short-term reversion towards 4590. I ushered this idea both on twitter and discord at 4560 before the move to 4590.
Reiterated afterwards prices were getting unstable and shaky around 4574 and sent a warning of caution out. This was good for +24pts down to 4550 and from there ushered +30pts more of sell into the close.
What’s Next?
I’m going to keep this post short and to the point as my hypothyroidism is significantly putting a damper on my energy levels today :(
4520 remains the #big-boy-pivot, if this begins to break down, then we have 4500, 4492 and 4440 (next major support) to look forward to.
4550 repairs the singles structure of the gap seen below and the extent of the value range is up towards 4580.
4606 remains an area of interest if prices were to auction > 4580
but in this market (especially this market), there is more emphasis on reacting than predicting whereas variables are constantly being rotated in and out of the decision making process.
I do believe this sell is quite overextended and a big bounce from short covering will take place soon maybe tomorrow or within the next couple sessions.
With tech earnings around next week which tends to hold a bid in the market, I believe this is the primary reason as to why some furus are bullish post 1/21 JAN MOPEX.
In the diagram above during OPEX we have a P-shape profile which is representative of short covering (farthest right profile), so we are starting to get some signs of it during evening trading hours (ETH) which makes sense as profit taking is expected if prices are unable to venture lower but again this is only ETH for now.
What do I expect to see?
There’s been a LOT of selling on the tape for many sessions now.
There will be a day where shorts will cover whether it be tomorrow, Friday, or some time next week.
I run a cumulative delta read on ES every session and it’s been sitting in the -30k for couple sessions now which highlights the extreme read of market sells compared to market buys (cumulative delta = market buys - market sells but delta doesn’t tell you everything, need to use it as a clue with price, price action, tape, tempo, dom, etc)
Ideally, you would want to see tempo increase to the upside, maybe a fight to keep it lower but bids reload, then a domino effect of one big short unwind that bleeds into many others, which you’ll see on the tape and price action. But again, this is the ideal scenario to unwind the amount of shorts in the market (which I would think is MANY).
for example, when 35s were ran, these were the stops that hit the tape
In the event we lose 4520, look below for the levels mentioned above (i.e 4500 & 4492, etc.) large caps & NQ for clues.
The risk reward at these prices in this time instance grows in favor of bulls with each passing session.
It is a pay-tience type of game.
Wait for the trade to come to you or when conditions are just right.
That is all folks, hope you found this short-read informative.
AGAIN this is in the short term time frame, I don’t try and predict what’s gonna happen out in 1-3 months time, that isn’t my style.
I am still getting accustomed to the functionalities of substack and do plan to spend my free time likely weekends working on a library of content that I have learned and/or new material during my trading career.
I will do my best to provide updates for tomorrow and during regular trading hours (RTH).
Subscribe for more future content :)
wonderful post ty
Thank you! As always, your analysis were spot on! Though I am not an active trader, I always read all your posts..