Tuesday, October 4, 2016

London Bomb Scare and Busy Markets

A very odd day..   Yesterday, I was confused if the market would continue it’s late day march higher or would follow the MP structure lower.  Recall this:

Well, surprise, surprise….   

(Neutral) Turns out the NQ engulfed yesterday and stayed within the recent range directly above its barnacle island while the (Bear) ES clearly refersed off it’s 90 Day HVA top and liquidated into its 30 day HVA (see below)

It began with the Asian markets holding steady yesterday’s rally position and then during the London session from 3-6am, price probed further higher before returning to yesterday’s settle.   At the open, we had every signal indicating we would be going long but as many days before, the probing activity longer would stall encouraging several false reversals off the top.  

Then came the bomb scare out of London which started a HFT sell frenzy with flash liquidation. Examination of the stopping points were insightful (Note to self - mark key points as potential gathering spots in the event of future "news").   After the bomb scare, price action went on auto pilot to recover some of the damage done in the morning.   It appeared to take a couple passes to be sure everything was in order and trades we should’ve seen coming. It was a good day to trade what was in front of us.

(Bear) In the afternoon, the pit session went opposite of yesterday’s trend and began to liquidate which agreed with the day time framing - Lesson, go with the bigger trend...

Overall, the volume was very strong today with this wild news.

(BEAR) For the ES, we actually have the makings of a Bearish engulfment of yesterday’s range. Initial eyeball analyses says go short on ES.

(Neutral) The NQ was able to maintain building support above it’s barnacle island

Based on the MP alone, my call for tomorrow is

(neutral) for NQ at 4840-4890 or
(bear) for NQ into the LVA 4812-4846
(neutral) for ES into LVA  2146-2156)
(bear) for ES to 2121 HVA bottom

With so much price action today, a zoom out is in order (180 days)

(Bear) On Balance Volume shows a continued liquidation of shares since Brexit .  
(Neutral Bull) We see the NQ continuing it’s pattern of rectangles long.   
(Neutral Bear) It appears ES may have put in a complex top with pendant and returning lower to fill in it’s LVA

Simply for reference is the YM chart agreeing with the ES chart and showing we are on the Bear side of SMA200 and approaching a point where things might start getting interesting...

Zooming into today’s action:
Very good agreements, this market is clearly being operated by short term brokers and dealers
Key Levels reached:
(Bear) NQ Low at Major Trend line, Fib level, 90 Day Barnacle Island HVA edge
(Bear) ES LOW at 30 day HVA POC Edge & Globex Low (-3 nights)

VOLUME : nearly twice average volume

POSITION/STRUCTURE - Within well defined MP Structure.  Today’s MP displayed 3 distributions.

Runaway / Excess / Spikes - None
MP POC/VA/LOD/LOD Feature relationships (higher, lower?)
  •      (Bull) (NQ engulfed yesterday, POC higher, settle higher)
  •      (Bear) ES engulfed yesterday, POC lower, settle lower)

TEMPO - Multiple drivers (morning, post bomb scare clean up, and US/afternoon mission)

Has one time framing failed?  
  •      (Bear) ES still framing lower
  •      (Neutral) NQ stil neutral

Lower closes and lower lows project the probability of lower prices 85 to 88 percent of the time. This trend usually lasts for three days before reversing.
(Bull, both ES & NQ) End-of-day trend (last hour) returned to the VWAP/POC after a day down low

Directional Preference
  • (Bear) ES Moderately weak (higher volume, OL lower)