Last week remained in a primarily balanced state until Thursday’s outside day which resulted in some extremes from Other Timeframe (OTF) sellers initiating positions into the NY AM Open. When the market decides to breakout, you monitor for acceptance or a lack of continuation of the move. Thursday resulted in a failed breakout attempt which rotated price back down into balance and also led to a PM session liquidation of longs. Buyers stepped in on the other side of the balance (the CPI gap UP/gap fill), effectively absorbing the sellers into the close. This resulted in a gap UP Friday. Friday’s AM session activity confirmed that OTF sellers had indeed stopped their attempt from Thursday with the lack of continuation, with the day closing as an inside bar.
In a balanced state, price will have rotations around value (trade back towards fair value from highs and lows; sell the pops, buy the dips) when there is a failure to breakout. This just tells us that the market is awaiting more information to determine where the fair value may lie in the near and longer term future. Once this new value is derived, then OTF players will initiate positions to move price away from the current value (5333) to a new area. $ES, 30min Chart: 8-Day Balance (Consolidation)
Daily = Balance
Weekly = OTFU (made a higher high last week)
Monthly = OTFU (made a higher high)
OTF Players = the ones who can move the market, who we want to trade alongside
Levels + Focus:
The outside day extremes are of interest this week. The primary state of the market is still in balance for the short term. Eyes will be on GDP this week and whether that invites opportunity for price to move away from the current value area. Price closed around our old level and single print area of 5323, so this is the pivot to watch for into next week.
Buyers
[This move could form by testing the the zones below, prior to GDP]
5323 (Pivot) → 5343 (need to see initiation from buyers and compete with the seller from Thursday; think a big move like CPI) → FULL MOVE from this daily consolidation breakout would be up to 5443 where we would expect responsive selling activity OR initiation from OTF players.
Sellers
[This move could form by testing the extreme Thursday single prints]
Reject 5323 → 5284 → 5263 → 5240 - 5220 (green LVN area + single print) → Full Move from this daily consolidation breakout failure would be 5189
This is where price consolidated prior to breaking out of a 3 week balance and over the past 2 months. The red rectangle is a LVN, where we would expect responsive buying activity in this area. The month’s current VWAP is also located in this area. The old fair value of 5245 also lies here.
VIX, Daily
Volatility would need to see a close through 13.10 to indicate any chances of sellers holding their move this week. Buyers need to see daily closes to continue below 12. DXY, Daily
Currencies remain in balance on the monthly and weekly. Daily has attempted to OTFU by making a higher high on Friday but failed. GDP (US) will be the primary driver for currencies this week in terms of sentiment. Bottom trend-line is the current trend for 2024.
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