Notice: To view this week’s big picture outlook, click here.
What Happened: Ahead of a busy earnings week, U.S. index futures traded divergent overnight, with the S&P 500, in particular, auctioning primarily in prior-balance and -range.
What Does It Mean: After recovering a breakdown in the week prior, and breaking balance to the upside, market participants indicated a willingness to explore higher prices.
On Friday, after the S&P 500 found acceptance above the $3,813.50 ledge and $3,824.25 balance-area high (BAH), it encountered responsive selling near the $3,840.75 high-volume node (HVNode), the site of a downtrend line.
Since the selling transpired at a visual level, market participants know that technically-driven, short-term traders in control. In other words, institutions (e.g, funds) tend not to transact at exact technical levels.
What To Expect: Monday’s regular session (9:30 AM – 4:00 PM ET) will likely open inside of the prior-balance and -range, suggesting higher volatility and limited directional opportunity.
Thereafter, participants can expect continued balance or initiative buying to take out the $3,859.75 overnight all-time high (there is a low probability that overnight all-time highs end the upside discovery process) and $3,884.75 price projection, or double the width of the balance-area, the typical target on a balance-area breakout.
In the worst case, any break that finds increased involvement (i.e., supportive flows and delta) below $3,824.25 BAH, would favor continuation as low as the $3,763.75 balance-area low (BAL).
The go/no-go for upside is the $3,854.00 regular trade high. The go/no-go for downside is $3,822.25 pullback low.
Levels Of Interest: $3,854.00 regular trade high, $3,822.25 pullback low.