greetings,
Wild day today involving chop & the typical spike-post-fomc-crush-vixx-on-vixperation type day. Today’s move had many reconsider ATH again, which they have structural reasons to believe based on higher lows formed & slow down of sell momentum.
Yesterday, I went in thinking there would be a noticeable bid from vanna in the morning as from my readings say vanna has a big day come day of vixperation.
However, the open tape was disappointing and ended up in the classic sell-lower-chop-around-til-fomc price action & did not see my lead indicators like VXX nor TSLA move in the direction that supported the uptrend open drive.
In this sense, my bias in relation to time was incorrect.
VXX traded sideways/balance for most of the day and the unwind of vxx hedges did not come until post FOMC, which is information for me to use next time.
At the close, the bids were soaked, very much present.
All this means is there are buyers willing to absorb all sell orders.
I noticed the momentum shift from sellers to buyers around 4440-4450 before making a beeline towards 4470-80 & finding buyers at higher prices in the 4460-70 region, which when you see buyers step up with similar bid soaking effects, is usually bullish.
Question here is are they new buyers, hedges, shorts, etc?
May likely be a combination of all the above to be honest but since it is MOPEX this week, direction won’t be entirely clear until Tuesday.
Speaking of VIXperation, post vixperation sees weakness in the market (see vixperation)
This does not necessarily mean prices will faulter lower because of the deduction of the unwinding of vxx flows but rather saying the market is weaker relative to pre-vixperation.
A pattern in this market has been a double top formation followed by a leg lower.
Will this time be different?
Below is a side-by-side screenshot of prices from last FOMC & today’s FOMC.
Not the exact same pattern nor context but history tends to rhyme right?
What is similar in these contexts is trapped longs but trapped longs on an uptrend at 4800 is a bit different than new trapped longs at 4464 in a sideways, questionable trend so this may or may not be of any significance but this is a pattern I want to highlight.
What does the tape say?
Earlier, it had a test after hours which brought it down 10 handles but quickly found a bid back at 4460.
During RTH, sell presence didn’t show dominance until we poked around at 4480-85 so if prices do retest that area, I would expect sellers to show up.
Speaking of the tape, these pumps also beg the question of whether ‘real’ buying sustains the bid or this is still exit liquidity for large players but can only be answered as time progresses.
As of now, the tape is fairly bullish but we’ll see what the overnight session brings.
I think if we open above 4464 tomorrow & hold above, we may explore 4494.
If we open under 4464 & stay under, I’m inclined to think we look for 4434.
Why 4494 or 4434?
Ever since we short squeezed into this 4400 area, the market has been moving in these +30pt ranges, +60pts depending on type of day and where the base is.
This area also coincides with last weeks VPOC of 4496 & this week’s intraday large volume node for the up and downside respectively.
With these targets, I am keeping in mind the ranges the market has currently been shaping as well as the reference areas of supply, volume, value, etc to confirm the intended destinations.
On that note, buyers have quite the supply to get through between 4470-4530, so until we begin chewing through all of this overhang & other lead indications in the market point up, I am very wary to believe in a regime shift.
What else?
10YR still hanging around 2%.
This structure looks quite toppish at 2.07% and if it begins exploring under 2%, this may bring more bid into the market.
NQ has a similar look to ES with intentions to break out or break down.
If it goes bid over 14.7k, I would think it makes a run towards 14.8k.
Conversely, if we begin to offer under 14.547k, I would think 14.456k is next.
With this context in mind, here are my thoughts
4464 is my pivot tomorrow, I think the next +30-60pts will come from this level.
Above explores 4494 where 4480-4485 had seller presence from RTH.
Under explores 4434-4440.
With GEX growing increasingly positive and with VXX lower, I don’t think the range will be too large.
OPEX (Friday) ranges will be wider as there are unwinds and repositioning from large players.
The sentiment now is bullish, whether this becomes a ‘bull’ trap or a change in regime is up for debate but the tape as of now does have bullish tones & as long as we remain bid > 4464, bulls have the reigns.
Personally, I am not convinced in this ‘shift of narrative’ until we begin accepting over 4530.
I would argue sellers have a decent chance at making an attempt for lower prices as the market is weaker from vixperation & there have been new trapped longs from today’s price action.
With this context in mind, I will be watching the tape & other lead indicators for confirmation or invalidation of which thinking is correct.
Cheers,
chika
[disclaimer: this is not financial advice, just my opinions]
Hi there, really appreciate your work. You have been spot on.
I would be interested to join your discord. Can you send me an invite to your channel?
Thanks so much
Hey man! Excellent post! Quick question; what is it exactly are you looking for when reading the tape? Like primarily size? Or how fast the orders come in? In addition, does it only make sense to look at the tape at key areas/ reference points like a VAL or POC?? One issue im having is that im observing the time and sales on thinkorswim but the issue is that the live market orders that come in dont specify whether they are hitting the ask or the bid; the colors just correspond to upticks and downticks on TOS.. :( hope that makes sense; keep up good work bud!