What Happened: Alongside fading stimulus hopes, U.S. index futures remained range bound ahead of Friday’s monthly options expiry, suggesting further acceptance of Wednesday’s spike liquidation.
What Does It Mean: After Thursday’s test of the micro-composite high-volume node at $3,557, the fairest price to do business during last week’s balancing activity, responsive buyers emerged, pushing prices back into Wednesday’s spike liquidation.
Further, the aforementioned liquidation came after participants struggled to maintain higher prices for numerous sessions prior, evidenced by the divergent delta (i.e., non-presence of committed buying) and low-excess at the edges of balance.
As a result, because much of this week’s activity was mechanical, participants come into today’s session knowing that (1) Wednesday’s end-of-day spike was the result of weak-handed, short-term buyers liquidating in panic, (2) the selling did not attract increased participation (i.e., price diverged from value), and (3) Friday’s monthly options expiry could mark a decisive move depending on how existing contracts are rolled forward.
Therefore, in light of Thursday’s response to the $3,557 high-volume node and Friday’s options expiry, participants can carry forward the prior day’s framework for trade.
If participants manage to spend time and build value in or below the prior day’s selling activity, then initiative sellers remain in control and the liquidation could be the beginning of a new trend to the downside, confirmed by range expansion beyond the $3,506.25 excess low. Otherwise, there is the potential for a failed break-down in which participants manage to rotate back over $3,585, the lower boundary of the upper-balance area.
Levels Of Interest: Micro-composite HVN at $3,557, the $3,506.25 excess low, as well as the $3,585 balance-area low.